SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report
Filed pursuant to Section 12, 13, or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) July 18, 1997
INTELLIGENT ELECTRONICS, INC.
-----------------------------
(Exact name of issuer as specified in charter)
PENNSYLVANIA 0-15991 23-2208404
(State or Other Jurisdiction Commission (I.R.S. Employer
of Incorporation or file number Identification
Organization) Number)
411 Eagleview Boulevard, Exton, Pennsylvania 19341
(Address of principal executive offices)
(610) 458-5500
(Registrant's telephone number, including area code)
<PAGE>
Item 2. Acquisition or Disposition of Assets
------------------------------------
XL Transaction
On July 18, 1997, Intelligent Electronics, Inc. and certain of its
direct and indirect wholly-owned subsidiaries (the "Company"), and
XLConnect Solutions, Inc. ("XLConnect") consummated the sale of certain
assets as contemplated in an Asset Purchase Agreement, as amended (the
"Purchase Agreement") with GE Capital Information Technology Solutions
Acquisition Corp. (the "Buyer"), a subsidiary of GE Capital Information
Technology Solutions, Inc. ("GECITS"), pursuant to which:
(a) The Company sold to the Buyer certain assets related to the
Company's direct computer hardware sales business ("XLSource"),
consisting primarily of the inventory, accounts receivable and customer
contracts relating to 20 of the 24 XLSource locations and real property
leases and fixed assets related to six of such 20 locations; and
(b) XLConnect sold to the Buyer certain specified services contracts
and related assets, consisting principally of accounts receivable and fixed
assets.
The purchase price paid by the Buyer in the transaction pursuant to
the Purchase Agreement (the "XL Transaction") was approximately $135.7
million, based on the estimated net book value of the assets being sold of
approximately $94.2 million. The purchase price is subject to adjustment
after closing based on the actual net book value of such assets as of the
closing date. Of the purchase price, approximately $102.9 million was paid
in cash at closing, with approximately $32.8 million paid into escrow. Of
the escrow, approximately $22.8 million was put into escrow subject to
release if and when the consent of two customers of the Company to the
transaction are obtained. The remaining $10.0 million is to be retained
for up to 240 days to fund purchase price adjustments and obligations of
the Company and XLConnect under the Purchase Agreement, including the
obligation to repurchase from the Buyer any accounts receivable which were
sold to the Buyer and remain uncollected 120 days after the closing date.
Of the total purchase price paid in the XL Transaction, XLConnect received
approximately $9.3 million (based on the estimated net book value of the
assets acquired from it of approximately $4.5 million). The Company
retained substantially all of the accounts payable of the locations being
sold to the Buyer. As a result of the XL Transaction, the Company
anticipates that it will record a pre-tax loss of approximately $23.0
million, net of transaction costs, plus a tax provision of approximately
$6.3 million. The tax provision is due to differences between the tax
bases of the assets being sold and their amounts for financial reporting
purposes (primarily goodwill).
RND Transaction
---------------
On July 18, 1997, the Company consummated the sale of its business
(the "Indirect Business"), of providing information technology product,
services and solutions to network integrators and resellers, contemplated
in a Stock Purchase Agreement, as amended, between the Company and Ingram
Micro Inc. ("Ingram") (the "RND Transaction"). The purchase price was
$78.0 million, payable by assumption of liabilities, based on the balance
sheet of the Indirect Business at closing. The Company paid to Ingram
approximately $4.5 million, which was the amount by which the estimated net
assumed liabilities (which included an intercompany payable of $10.0
million from the Indirect Business to the Company, used to fund one of the
escrow accounts) exceeded the purchase price. Three separate escrow
accounts were established. An escrow in the amount of $10.0 million is for
final settlement of any purchase price adjustments and indemnity claims.
Another escrow account in the amount of $2.5 million, was established
pending resolution of certain issues between the Company and Ingram. A
third escrow account in the amount of $5.0 million was established to
secure the Company's obligations under the Amended and Restated Volume
Purchase Agreement ("Supply Agreement"), as more fully described below.
As a result of the RND Transaction, the Company anticipates that it will
record a pre-tax gain of approximately $14.0 million, net of transaction
costs, and a tax provision of approximately $5.7 million.
Under the terms of the Supply Agreement, XLSource agreed to order 100%
of its product requirements available from Ingram, of no less than $1.8
billion, over a three-year period. If the minimum annual commitment is not
met, the Company may elect to extend this contract for up to two years. In
addition, if in any one year, purchases are below a certain level, an
adjustment may be made to the cost of products purchased from Ingram. The
Company has guaranteed to Ingram performance by XLSource of its obligations
under the Supply Agreement. In connection with the Supply Agreement,
Ingram agreed that certain product purchases by GE Capital Information
Technology Solutions - North America, Inc., an affiliate of the Buyer
("GECITS-NA") from Ingram which are in excess of GECITS-NA's current
purchases from Ingram will be credited against XLSource's $1.8 billion
purchase commitment under the Supply Agreement. The Company believes that
GECITS-NA is not required to purchase any minimum amount of product from
Ingram. XLSource and the Company have not been released from any of their
obligations regarding the $1.8 billion commitment, and the Company has
delivered to Ingram a $7.5 million irrevocable letter of credit and the
$5.0 million escrow account discussed above to secure the purchase
commitment and other obligations of the Company. At any time, the $5.0
million escrow account can be replaced by a $5.0 million irrevocable letter
of credit, at the Company's election.
Although the Company believes that its purchases from Ingram and those
of GECITS-NA will satisfy XLSource's purchase obligations under the Supply
Agreement, there can be no assurance in that regard. In the event such
purchase obligations are not satisfied within the original term of the
Supply Agreement or any extension period, certain liquidated damages, in
the amount of 1.5% of any short-fall, are due to Ingram. Although the
Company does not currently believe that the payment of any such liquidated
damages will have a material adverse effect on the Company, there can be no
assurance in that regard as well.
After consummation of the XL Transaction and the RND Transaction, the
Company will own 80% of the outstanding common stock of XLConnect and
operate XLSource from four locations: Cleveland, Cincinnati, Indianapolis
and Pittsburgh. Revenues of the retained XLSource operations, which will
continue to function in a partnership relationship with XLConnect, were
approximately $200.0 million in the fiscal year ended February 1, 1997 and
approximately $50.0 million in the fiscal quarter ended May 3, 1997.
Item 7. Financial Statements and Exhibits
- ------- ---------------------------------
(b) Pro forma Financial Information
-------------------------------
The Company intends to file pro forma financial information under
cover of Form 8-K/A as soon as practicable, but not later than September
30, 1997.
(c) Exhibits
--------
* 2.1 Stock Purchase Agreement between Ingram Micro Inc. and the
Company dated April 29, 1997 (Exhibit 10.20 to the Company's
Annual Report on Form 10-K for the year ended February 1, 1997).
2.2 Amendment No. 1 to the Stock Purchase Agreement between Ingram
Micro Inc. and the Company dated as of July 2, 1997.
2.3 Asset Purchase Agreement between GE Capital Information
Technology Solutions Acquisition Corp. and the Company dated as
of July 1, 1997.
2.4 First Amendment to the Asset Purchase Agreement between GE
Capital Information Technology Solutions Acquisition Corp. and
the Company dated as of July 18, 1997.
* 10.1 Volume Purchase Agreement dated April 29, 1997 between XLSource,
Inc. (a wholly-owned subsidiary of the Company) and Ingram Micro
Inc. (Exhibit 10 to the Company's Quarterly Report on Form 10-Q
for the quarter ended May 3, 1997). **
10.2 Amended and Restated Volume Purchase Agreement dated July 18, 1997
between XLSource, Inc. (a wholly-owned subsidiary of the Company)
and Ingram Micro Inc. **
__________________________________________
* Incorporated by Reference
** Portions of this Agreement have been omitted pursuant to a request for
confidential treatment.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
INTELLIGENT ELECTRONICS, INC.
Date: August 1, 1997 By: /s/ Thomas J. Coffey
-------------------------------------
Thomas J. Coffey,
Senior Vice President and
Chief Financial Officer
Exhibit 2.2
AMENDMENT NO. 1 dated as of July 2, 1997 (this "Amendment") to the
Stock Purchase Agreement dated as of April 29, 1997 (the "Agreement") among
Intelligent Electronics, Inc. ("Seller"), Ingram Micro Inc. ("Buyer") and
XLSource, Inc.
W I T N E S S E T H
WHEREAS, pursuant to Section 15.02 of the Agreement, the Agreement may
be amended by the parties to the Agreement; and
WHEREAS, the parties desire to amend the Agreement in the manner set
forth below;
NOW, THEREFORE, the parties hereto agree as follows:
1. The Agreement is hereby amended by adding to the cover page
thereof, immediately after "XLSOURCE, INC.", the following names: "TFN,
INC., RCK COMPUTERS, INC. and E-C COMPUTER TECHNICAL SERVICES, INC."
2. The heading of the Agreement is hereby amended by adding the
following language immediately prior to the "." appearing in the last line
thereof:
"TFN, Inc., an Ohio corporation ("TFN"), RCK Computers, Inc., a Texas
corporation ("RCK"), and E-C Computer Technical Services, Inc., a
Texas corporation ("E-C")"
3. Section 1.01(a) of the Agreement is hereby amended by adding the
following defined term to such Section in alphabetical order:
""Guarantor" means each of Seller, XLSource, TFN, RCK and E-C;
and "Guarantors" means all of such Persons."
4. The preamble to Section 2.02 of the Agreement is hereby amended
and restated to read in its entirety as follows:
"SECTION 2.02. Closing. The closing (the "Closing") of the purchase
and sale of the RN Shares hereunder shall take place at the offices of
Davis Polk & Wardwell, 450 Lexington Avenue, New York, New York, on July
18, 1997, assuming satisfaction of the conditions set forth in Article 12
on or prior to such date, but in no event later than 10 business days after
the satisfaction of such conditions. At the Closing:"
5. Article 4 of the Agreement is hereby amended and restated to read
in its entirety as follows:
"ARTICLE 4
Representations and Warranties of The Guarantors
Each Guarantor represents and warrants to Buyer as of the date
hereof and as of the Closing Date that:
Section 4.01. Corporate Existence and Power. Such Guarantor is
a corporation duly incorporated, validly existing and in good standing
under the laws of its jurisdiction of incorporation and has all corporate
powers and all material governmental licenses, authorizations, permits,
consents and approvals required to carry on its business as now conducted.
Such Guarantor has heretofore made available to Buyer true and complete
copies of its certificate of incorporation and bylaws as currently in
effect.
Section 4.02. Corporate Authorization. The execution, delivery
and performance by such Guarantor of this Agreement and (in the case of
XLSource) the XLSource Supply Agreement and the consummation by such
Guarantor of the Transaction and (in the case of XLSource) the transactions
contemplated by the XLSource Supply Agreement are within its corporate
powers and have been duly authorized by all necessary corporate action on
the part of such Guarantor. Each of this Agreement and (in the case of
XLSource) the XLSource Supply Agreement constitutes a valid and binding
agreement of such Guarantor, enforceable against such Guarantor in
accordance with its terms, except as the enforcement thereof may be limited
by applicable bankruptcy, insolvency, fraudulent conveyance, moratorium or
other similar laws affecting the enforcement of creditors' rights
generally.
Section 4.03. Government Authorization. The execution, delivery
and performance by such Guarantor of this Agreement and (in the case of
XLSource) the XLSource Supply Agreement and the consummation of the
Transaction and (in the case of XLSource) the transactions contemplated by
the XLSource Supply Agreement require no action by or in respect of, or
filing with, any governmental body, agency or official.
Section 4.04. Noncontravention. The execution, delivery and
performance by such Guarantor of this Agreement and (in the case of
XLSource) the XLSource Supply Agreement and the consummation by such
Guarantor of the Transaction and (in the case of XLSource) the transactions
contemplated by the XLSource Supply Agreement do not and will not violate
its certificate of incorporation or bylaws, violate any applicable law,
rule, regulation, judgment, injunction, order or decree or require any
consent or other action by any Person under, constitute a default under, or
give rise to any right of termination, cancellation or acceleration of any
right or obligation of such Guarantor or to a loss of any benefit to which
such Guarantor is entitled under any provision of any agreement or other
instrument binding upon such Guarantor."
6. A new Section 6.13 of the Agreement is hereby added to read in
its entirety as follows:
"SECTION 6.13. Seller Stock Owned by RND, Inc. Prior to the
Closing, Seller shall cause all shares of common stock of Seller owned by
RND, Inc. either (i) to be transferred to Seller or one or more of Seller's
subsidiaries (other than one or more of the Companies) or (ii) to be
canceled, in each case without consideration to RND, Inc."
7. Article 7 of the Agreement is hereby amended and restated to read
in its entirety as follows:
"ARTICLE 7
Covenants of Guarantors
The Guarantors, on a joint and several basis, agree that:
Section 7.01. Guarantee of Guaranteed Obligations. Each
Guarantor (other than XLSource), on a joint and several basis, hereby
irrevocably and unconditionally guarantees to Buyer the prompt and full
discharge by XLSource of all of XLSource's covenants, agreements,
obligations and liabilities contained in the XLSource Supply Agreement and
in Section 9.06 of this Agreement, including without limitation the due and
punctual payment of all amounts which may become due and payable by
XLSource under such agreement and such Section when and as the same shall
become due and payable. Each Guarantor (other than Seller), on a joint and
several basis, hereby irrevocably and unconditionally guarantees to Buyer
the prompt and full discharge by Seller of all of Seller's covenants,
agreements, obligations and liabilities under this Agreement, including
without limitation the due and punctual payment of all amounts which may
become due and payable by Seller hereunder when and as the same shall
become due and payable. The obligations of each of Seller and XLSource
(each, an "Obligor") guaranteed by the Guarantors and referred to in the
two preceding sentences shall be hereinafter referred to collectively as
the "Guaranteed Obligations" of such Obligor; provided that the Guaranteed
Obligations referred to in the first sentence of this Section shall be
reduced, in connection with each XLSource Sale (other than any such
XLSource Sale to the XLS Purchaser (as hereinafter defined)) to a Person
approved by Buyer pursuant to the provisions of the XLSource Supply
Agreement, by an amount equal to the Designated Percentage applicable to
such XLSource Sale. Each Guarantor agrees that, with respect to all of its
Guaranteed Obligations to pay money, such guarantee shall be a guarantee of
payment and performance and not of collection.
Section 7.02. Guarantee Unconditional. The obligations of each
Guarantor under this Article 7 are unconditional and absolute and, without
limiting the generality of the foregoing, shall not be affected by any
amendment, modification or waiver of the obligations of any Obligor or its
Affiliates under this Agreement, except in accordance with the terms of
such amendment, modification or waiver, any change in the corporate
existence of any Obligor or any of its Affiliates or any insolvency,
bankruptcy, reorganization or other similar proceeding affecting any
Obligor or any of its Affiliates or its respective assets or resulting in
any release or discharge of any obligations of an Obligor or its Affiliates
under the XLSource Supply Agreement or this Agreement, the existence of
any claim, set-off or other right which a Guarantor may have at any time
against another Guarantor, any of such other's Affiliates, Buyer or any
Person (provided that nothing herein shall prevent the assertion of any
such claim by separate suit or compulsory counterclaim) or any other act or
omission to act or delay of any kind by such other Person, any of its
Affiliates, Buyer or any other Person or any other circumstance which
might, but for the provisions of this paragraph, constitute a legal or
equitable discharge of the obligations of a Guarantor under this Article 7.
Section 7.03. Waivers. Each Guarantor hereby waives any right,
whether legal or equitable, statutory or non-statutory, to require Buyer to
proceed against or take any action against or pursue any remedy with
respect to an Obligor or any other Person or make presentment or demand for
performance or give any notice of nonperformance before Buyer may enforce
its rights hereunder against such Guarantor.
Section 7.04. Discharge; Reinstatement in Certain Circumstances.
The obligations of each Guarantor (other than Seller) under this Article 7
shall remain in full force and effect until the earlier of (i) the time
that its Guaranteed Obligations shall have been performed in full and (ii)
the sale by Seller of all of the equity securities of such Guarantor to a
Person other than an Affiliate of Seller or another Guarantor; provided
that the obligations of such Guarantor hereunder shall terminate if, prior
to the Closing, Seller shall obtain for the benefit of Buyer an irrevocable
letter of credit, in the amount of $7,500,000 and otherwise reasonably
satisfactory to Buyer, for the purpose of securing the payment of the
Guaranteed Obligations hereunder. Any such letter of credit shall remain
in full force and effect until (i) the third anniversary of the Closing
Date or (ii) the second anniversary of the Closing Date if, prior to such
anniversary, all of the equity securities of each of the Guarantors have
been sold in one or more XLSource Sales. Except as provided in the
immediately preceding sentence with respect to the obligation of Seller to
provide a letter of credit, the obligations of Seller under this Article 7
shall remain in full force and effect until the time that its Guaranteed
Obligations shall have been performed in full. If, at any time, any
performance by any Person of any Guaranteed Obligation is rescinded or must
be otherwise restored or returned, whether upon the insolvency, bankruptcy
or reorganization of a Guarantor or otherwise, the obligations of the
Guarantors hereunder with respect to such Guaranteed Obligation shall be
reinstated at such time as though such Guaranteed Obligation had become due
and had not been performed.
Section 7.05. Subrogation. Upon performance by each Guarantor
of any of its Guaranteed Obligations, such Guarantor shall be subrogated
with respect to such Guaranteed Obligations to the rights of the Person in
favor of whom such Guaranteed Obligations run; provided that no Guarantor
shall enforce any of its Guaranteed Obligations by way of subrogation
against another Person that is a Guarantor while any Guaranteed Obligation
is due and unperformed by such other Person.
Section 7.06. Limit of Liability. The obligations of each
Guarantor under this Article 7 shall be limited to an aggregate amount
equal to the largest amount that would not render its obligations hereunder
subject to avoidance under Section 548 of the United States Bankruptcy Code
or any comparable provisions of any applicable state law."
8. Section 9.05 of the Agreement is hereby amended and restated to
read in its entirety as follows:
"SECTION 9.05. Segregation of Certain Sales Proceeds. (a) In
connection with each XLSource Sale that occurs prior to the termination in
full of the obligations of XLSource pursuant to Article 7, at the Closing
(if Seller has previously consummated an XLSource Sale to the XLS
Purchaser) or concurrently with the consummation of an XLSource Sale to the
XLS Purchaser (if the consummation of an XLSource Sale to the XLS Purchaser
shall occur after the Closing Date), the Guarantors will enter into
arrangements reasonably satisfactory to Buyer pursuant to which an amount
in cash equal to the Segregated Amount will be deposited for the benefit of
Buyer in a segregated account for the purposes specified in Section
9.05(d).
(b) In lieu of segregating any amounts pursuant to Section 9.05(a)
in connection with an XLSource Sale, the Guarantors may elect to obtain for
the benefit of Buyer an irrevocable letter of credit in an amount equal to
the Segregated Amount and otherwise reasonably satisfactory to Buyer for
the purposes specified in Section 9.05(d).
(c) Promptly following the end of each calendar quarter during the
term of the XLSource Supply Agreement, Buyer will calculate the Cumulative
Purchase Shortfall and will deliver written notice to Seller setting forth
(i) the amount of the Cumulative Purchase Shortfall and (ii) the Adjusted
Amount. If such Adjusted Amount is less than the Segregated Amount, such
Adjusted Amount (rounded up or down to the nearest $100,000) shall become
the new Segregated Amount; provided that in no event shall the Segregated
Amount be less than $5,000,000 prior to the third anniversary of the
Closing Date. In such event (A) if Seller has obtained a letter of credit
pursuant to Section 9.05(b), Seller shall cause to be issued and delivered
to Buyer a substitute letter of credit in an amount equal to the new
Adjusted Amount (subject to the proviso of the immediately preceding
sentence) and containing all other terms and conditions then in effect
applicable thereto and, concurrently therewith, Buyer shall deliver the
letter of credit then in effect to Seller for cancellation thereof or (B)
if Seller has segregated funds pursuant to Section 9.05(a), a portion of
the segregated funds shall be released such that the balance of the
remaining segregated funds after giving effect to such release shall be
equal to the new Adjusted Amount (subject to the proviso of the immediately
preceding sentence).
(d) Without limiting the obligations of the Guarantors under this
Agreement or the XLSource Supply Agreement, any amounts that are segregated
pursuant to Section 9.05 and any letter of credit obtained pursuant to such
Section shall be used by the Guarantors to secure and satisfy the
repayment of obligations of the Guarantors that are owing to Buyer
pursuant to the terms of this Agreement and the XLSource Supply Agreement.
(e) The obligations of the Guarantors pursuant to this Section 9.05
shall terminate and be of no further force or effect on the date following
the termination of the XLSource Supply Agreement on which XLSource and
Ingram mutually agree in writing (or absent a mutual agreement in writing,
a judicial decree to that effect) that all obligations of XLSource under
the XLSource Supply Agreement have been satisfied in full. The parties
agree to use their reasonable efforts to settle all claims arising under or
in connection with the XLSource Supply Agreement within 90 days following
the termination thereof.
(f) As used herein, the following words shall have the following
meanings:
"Adjusted Amount" as of the end of any calendar quarter means the
sum of (A) the product of (i) the Cumulative Purchase Shortfall, (ii) the
Designated Percentage and (iii) 1 1/2%, and (B) the aggregate amount of
pending claims of Buyer under the XLSource Supply Agreement and the amount
of claims with respect to which Buyer is seeking indemnification pursuant
to Article 10 or Article 13.
"Cumulative Purchase Shortfall" as of the end of any calendar
quarter means (A) the Guaranteed Minimum Revenue (as defined in the
XLSource Supply Agreement), plus (B) the Remaining Guaranteed Minimum
Revenue (as defined in the XLSource Supply Agreement) as of the end of such
calendar quarter, minus (C) the aggregate Deficiency Amounts (as defined in
the XLSource Supply Agreement), if any, deferred to the extended term of
the XLSource Supply Agreement pursuant to the terms of the XLSource Supply
Agreement, minus (D) the aggregate amount of Combined Purchases (as defined
in the XLSource Supply Agreement) as of the end of such calendar quarter;
provided that, for any period of less than one full year, "Combined
Purchases" shall be calculated by aggregating the Combined Purchases for
each calendar quarter during such period using, for purposes of this
calculation, a "Base Amount" equal to 25% of the then applicable Base
Amount (as defined in the XLSource Supply Agreement).
"Designated Percentage", with respect to any XLSource Sale, means
the greatest of the following percentages:
(i) the percentage of the aggregate revenues of the Guarantors for the
four full fiscal quarters immediately preceding the date of such XLSource
Sale generated by or attributable to the assets or business being sold in
such XLSource Sale;
(ii) the percentage of the aggregate book value of the assets of the
Guarantors represented by the book value of the assets sold in such
XLSource Sale; or
(iii) the percentage of the outstanding capital stock of all of the
Guarantors sold in such XLSource Sale.
"Segregated Amount" means the sum of (i) the product of the
Designated Percentage and $7,500,000 and (ii) in the case of any XLSource
Sale to the XLS Purchaser, $7,500,000 (or such greater amount as Ingram
shall determine in the event that such XLSource Sale constitutes a
Designated Percentage of more than 66-2/3%), as such sum is reduced from
time to time pursuant to Section 9.05(c).
"XLS Purchaser" means GE Capital Information Technology Solutions
- - North America, Inc.
"XLSource Sale" means any sale, transfer, conveyance or
disposition (directly or indirectly, in one transaction or a series of
related transactions, by operation of law or otherwise), to a Person other
than an Affiliate of Seller or the Guarantors, of (i) any of the assets of
the Guarantors or (ii) any of the equity securities of the Guarantors, in
each case other than in the ordinary course of business."
9. Section 9.06(a) of the Agreement is hereby amended by adding the
following language after the word "thereof" and before the comma on line 2
of such Section: "(other than any such XLSource Sale to the Purchaser (as
defined in the XLSource Supply Agreement))", and by deleting the defined
term "XLSource" on the third line and inserting, in its place, the words
"the Guarantors".
10. Section 9.06(b) of the Agreement is hereby amended to delete the
defined term "XLSource" from the first line thereof and to insert, in its
place, the words "the Guarantors".
11. The definition "Transferred Percentage" appearing in Section
9.06(c) of the Agreement is hereby amended to delete the defined term
"XLSource" from the second line thereof and to insert, in its place, the
words "the Guarantors".
12. A new Section 9.08 of the Agreement is hereby added to read in
its entirety as follows:
"Section 9.08. Amendment to XLSource Supply Agreement. At the
Closing, if Seller has previously consummated an XLSource Sale to the XLS
Purchaser, or concurrently with the consummation of an XLSource Sale to the
XLS Purchaser, if the consummation of an XLSource Sale to the XLS Purchaser
shall occur after the Closing Date, Buyer and XLSource shall enter into the
Amended and Restated XLSource Supply Agreement in the form attached hereto
as Exhibit B and Buyer, subject to the XLS Purchaser's concurrently
entering therein, shall enter into a resale agreement in substantially the
form previously furnished to Seller subject to completions, corrections
and other minor modifications as the parties thereto may agree; provided
that (i) Buyer shall have no obligation to enter into any such resale
agreement if the XLSource Sale to the XLS Purchaser is consummated more
than three months following the Closing Date and (ii) nothing in this
Section 9.08 shall limit the ability of Buyer and the XLS Purchaser to
amend, supplement, modify or terminate such resale agreement (it being
understood that Buyer has no present intention to do so)."
13. Section 12.02(a) of the Agreement is hereby amended to delete
the defined term "XLSource" each time it appears in such Section and to
insert, in each such place, the words "the Guarantors".
14. Section 12.02(e) of the Agreement is hereby amended to delete
the defined term "XLSource" from the second line thereof and to insert, in
its place, the words "the Guarantors".
15. Section 12.02(h) of the Agreement is hereby amended to read in
its entirety as follows:
"(h) XLSource shall have executed the long-term supply
agreement with Buyer in the form of Exhibit A hereto (as amended from time
to time, the "XLSource Supply Agreement") and, assuming due execution and
delivery by Buyer, the XLSource Supply Agreement shall be in full force and
effect."
16. Section 12.02(k) of the Agreement is hereby amended to delete
the defined term "XLSource" from the second and third lines thereof and to
insert, in its place, the words "the Guarantors".
17. Section 12.02(o) is hereby amended and restated to read in its
entirety as follows:
"(o) Seller shall have obtained from each lender listed on
Schedule 3.09(d) of the Seller Disclosure Letter an unconditional release
in form and substance satisfactory to Buyer of the obligations of the
Companies under the credit facilities referred to on such Schedule, except
for such obligations to be assumed by Buyer pursuant to Section 2.04 of
this Agreement."
18. Section 12.02(p) of the Agreement is hereby deleted in its
entirety.
19. Section 15.03(d) of the Agreement is hereby amended to read in
its entirety as follows:
"(d) Notwithstanding anything herein to the contrary, if this
Agreement is terminated by Buyer pursuant to Section 14.01(f), no fee shall
be payable pursuant to Section 15.03(b) or 15.03(c) if such termination
occurs more than 10 business days following the date that Seller notifies
Buyer in writing of the occurrence of an event referred to in Section
15.03(b) or 15.03(c)."
20. This Amendment shall be governed by and construed in accordance
with the laws of the State of New York.
21. Unless otherwise specifically defined herein, each term used
herein which is defined in the Agreement shall have the meaning assigned to
such term in the Agreement as amended by this Amendment. Each reference to
"this Agreement" and each other similar reference contained in the
Agreement shall from and after the date hereof refer to the Agreement as
amended by this Amendment.
22. This Amendment may be executed in any number of counterparts,
each of which shall constitute a single instrument.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the
date first above written.
INGRAM MICRO INC.
By: /s/ Jeffrey R. Rodek
------------------------------------------
Name: Jeffrey R. Rodek
Title: President
INTELLIGENT ELECTRONICS, INC.
By: /s/ Alan Resneck
------------------------------------------
Name: Alan Resneck
Title: Secretary
XLSOURCE, INC.
By: /s/ Alan Resneck
------------------------------------------
Name: Alan Resneck
Title: Secretary
Each of the undersigned hereby consents
to this Amendment and agrees to be bound
by the provisions of the Agreement as a
Guarantor thereunder.
TFN, INC.
By: /s/ Alan Resneck
------------------------------------------
Name: Alan Resneck
Title: Secretary
RCK COMPUTERS, INC.
By: /s/ Alan Resneck
------------------------------------------
Name: Alan Resneck
Title: Secretary
E-C COMPUTER TECHNICAL SERVICES, INC.
By: /s/ Alan Resneck
------------------------------------------
Name: Alan Resneck
Title: Secretary
Exhibit 2.3
ASSET PURCHASE AGREEMENT
Dated July 1, 1997
among
GE Capital Information Technology Solutions
Acquisition Corp.,
a Delaware corporation,
The Future Now, Inc.,
an Ohio corporation,
XLSource, Inc.,
an Arkansas corporation,
E-C Computer Technical Services, Inc.,
a Texas corporation,
RCK Computers, Inc.,
a Texas corporation
and
Intelligent Electronics, Inc.,
a Pennsylvania corporation
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
Definitions 1
ARTICLE II
Purchase and Sale of Assets 2
Section 2.01 Purchase of Assets 2
Section 2.02 Assumption of Liabilities 2
ARTICLE III
Purchase Price 2
Section 3.01 Purchase Price 2
ARTICLE IV
Closing 4
Section 4.01 The Closing Date 4
Section 4.02 Certificates, Instruments of Transfer, Etc. 4
ARTICLE V
Representations and Warranties 6
Section 5.01 Representations and Warranties of Sellers and
Shareholder 6
(a) Organization, Good Standing and Capitalization 6
(b) Stock Ownership 7
(c) Corporate Authorization 7
(d) Purchased Assets; Business 7
(e) Litigation 9
(f) No Conflict 10
(g) No Other Agreements to Sell Assets or Business 10
(h) Articles of Incorporation and By-laws 11
(i) Financial Statements 11
(j) Absence of Undisclosed Liabilities and Obligations 12
(k) Tax Matters 12
(l) No Brokers 12
(m) Employee Benefit Information 13
(n) Environmental Compliance 15
(o) Insurance 17
(p) Intangible Assets; Confidentiality Agreements 17
(q) Employees 17
(r) Compliance with Laws 18
(s) Transactions with Certain Persons 18
(t) Clients; Relationship with Accounts 19
(u) Absence of Certain Changes or Events 19
(v) Disclosure 21
(w) Delivery of Updated Exhibits 21
(x) Officers and Directors with Knowledge 21
Section 5.02 Representations and Warranties of Buyer 21
(a) Organization and Good Standing of Buyer 22
(b) Corporate Authorization 22
(c) No Conflict 22
(d) No Brokers 23
(e) Litigation 23
(f) XLC Common Customer. 23
Section 5.03 Representations and Warranties of XLConnect 23
ARTICLE VI
Conditions Precedent to Obligations of Buyer and Sellers 23
Section 6.01 Conditions Precedent to Obligations of Buyer 23
(a) Representations and Warranties True at the Closing Date 23
(b) Compliance with Covenants 24
(c) Delivery of Closing Documents 24
(d) Opinion of Sellers' and Shareholder's Counsel 24
(e) Approvals and Consents 25
(f) Litigation 26
(g) No Material Adverse Change 26
(h) No Change in Law 26
(i) Telephone and Fax Numbers 26
(j) Escrow Agreement; Transition Services Agreement 26
(k) Liens and Encumbrances 26
(l) HSR Act 27
(m) Closing Date Physical Count 27
(n) Satisfactory Phase I 27
(o) Delivery of Revised and Updated Exhibits 27
(p) Revenues of Business 27
(q) Provision of Product and Services 27
(r) XLConnect Oracle Service Agreement 27
Section 6.02 Conditions to Obligations Of Sellers and
Shareholder 27
(a) Representations and Warranties True at the Closing Date 28
(b) Compliance with Covenants 28
(c) Delivery of Closing Documents 28
(d) Opinion of Buyer's Counsel 28
(e) Consideration 29
(f) No Change in Law 29
(g) Litigation 29
(h) HSR Act 29
(i) Approvals and Consents 30
(j) Escrow Agreement; Transition Services Agreement. 30
(k) Provision of Product and Services. 30
(l) Consent of Shareholder's Shareholders. 30
(m) XLC Common Customers. 30
ARTICLE VII
Documents to be Delivered on Closing Date 30
Section 7.01 Documents to be Delivered by Shareholder and
Sellers on Closing Date 30
(a) Conditions Precedent 30
(b) Officer's Certificates 30
(c) Bills of Sale 30
(d) Assignment Agreement, Escrow Agreement and Transition
Services Agreement 31
(e) Resolutions of the Sellers and the Shareholder 31
(f) Incumbency Certificate of the Sellers and the
Shareholder 31
(g) Organizational Documents 31
(h) Good Standing; Qualification to Do Business 31
(i) Further Instruments 32
Section 7.02 Documents to be Delivered by Buyer on Closing Date 32
(a) Conditions Precedent 32
(b) Officer's Certificate 32
(c) Other Documents 32
(d) Further Instruments 32
ARTICLE VIII
Further Covenants and Agreements
of Sellers, Shareholder and Buyer 32
Section 8.01 Further Covenants and Agreements of Shareholder
and Sellers. 32
(a) Conduct of Business Pending Closing 32
(b) Access to the Business 34
(c) Corporate Name 34
(d) Changes in Representations and Warranties 34
(e) Further Assurances 34
(f) No Mergers, Consolidations, Sales of Assets, Etc. of
any Seller 35
(g) Minimum Net Worth of Shareholder 35
(h) Financial Statements 36
(i) Taxes 36
(j) Telephone and Facsimile Numbers 36
(k) Revised Exhibits Listing Assigned Agreements, Inventory,
Receivables and Fixed Assets 36
(l) Certain Rights Under Indemnity Agreement 37
(m) Sale of Fixed Assets at Other Sites 37
Section 8.02 Consents to Assignments; Permits 37
Section 8.03 Survival of Representations, Warranties, Etc. 38
Section 8.04 Allocations of Purchase Price 40
Section 8.05 Resolution of Disputes 41
Section 8.06 Inspection of Records 41
Section 8.07 Non-Competition; Non-Solicitation 42
Section 8.08 Shareholder Guarantees 45
Section 8.09 Mutual Cooperation 45
Section 8.10 Collection of Receivables 45
Section 8.11 Seller Employee Benefits and Employment 46
Section 8.12 Ingram Micro Inc. Agreement 47
Section 8.13 Obligation to Transfer all Account Knowledge 48
Section 8.14 XLC Common Customers 48
Section 8.15 XLConnect Service Agreement 48
ARTICLE IX
Miscellaneous 49
Section 9.01 Expenses 49
Section 9.02 Termination of Agreement 49
Section 9.03 Effect of Termination 50
Section 9.04 Benefit; Assignment 50
Section 9.05 Governing Law 50
Section 9.06 Breach; Failure of Condition 50
Section 9.07 Notices, Etc. 51
Section 9.08 Headings 52
Section 9.09 Counterparts 52
Section 9.10 Entire Agreement 52
Section 9.11 Waiver; Amendment; Modification 52
Section 9.12 Severability 53
Section 9.13 Press Releases 53
Section 9.14 HSR Filing 53
<PAGE>
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT, dated July 1, 1997 (this
"Agreement") is by and among GE Capital Information Technology Solutions
Acquisition Corp., a Delaware corporation ("Buyer"), The Future Now, Inc.,
an Ohio corporation, XLSource, Inc., an Arkansas corporation, E-C Computer
Technical Services, Inc., a Texas corporation, RCK Computers, Inc., a Texas
corporation (The Future Now, Inc., XLSource, Inc., E-C Computer Technical
Services, Inc. and RCK Computers, Inc. are each a "Seller" and,
collectively, the "Sellers") and Intelligent Electronics, Inc., a
Pennsylvania corporation and, directly or indirectly, the sole shareholder
of Sellers ("Shareholder").
WHEREAS, Sellers are in the business of reselling microcomputer
and technology products in the United States; and
WHEREAS, Sellers desire to sell their business of reselling
microcomputer and technology products conducted in and from the Acquired
Sites and the Other Sites; and
WHEREAS, Sellers intend to retain their business of reselling
microcomputer and technology products conducted in and from the Retained
Sites; and
WHEREAS, Sellers desire to sell and Buyer desires to purchase
from Seller, certain properties, rights and assets of Sellers as described
herein, for the consideration provided herein; and
WHEREAS, Shareholder, directly or indirectly, is the sole owner
and holder of all of the shares of capital stock of Sellers;
NOW, THEREFORE, in consideration of the mutual benefits to be
derived from this Agreement and the representations, warranties, conditions
and promises hereinafter contained, Sellers, Shareholder and Buyer hereby
represent, warrant and agree as follows:
ARTICLE I
---------
Definitions
-----------
For the purposes hereof, capitalized terms used herein shall have
the respective meanings assigned to them in Attachment A or elsewhere
herein. References in this Agreement to Sections, subsections, paragraphs,
clauses, Attachments and Exhibits are to Sections, subsections, paragraphs,
clauses, Attachments and Exhibits in or to this Agreement unless otherwise
indicated.
ARTICLE II
----------
Purchase and Sale of Assets
---------------------------
Section II.01 Purchase of Assets. In reliance on the
representations, warranties and covenants contained herein and subject to
the terms and conditions hereof, on the Closing Date, Sellers will (i)
assign to Buyer (in the case of the Leases, by instruments of transfer
suitable for recording) all of Sellers' right, title and interest under the
Assigned Agreements and (ii) sell, convey, assign, transfer and deliver to
Buyer, and Buyer will purchase from Sellers, each of the other Purchased
Assets by bills of sale or other appropriate instruments of transfer and
XLConnect will sell, convey, assign, transfer and deliver to Buyer, and
Buyer will purchase from XLConnect, all of XLConnect's right, title and
interest under the Power by the Hour Agreements and related Purchased
Assets, by appropriate instruments of transfer.
Section II.02 Assumption of Liabilities. In reliance on the
representations, warranties and covenants contained herein and subject to
the terms and conditions hereof, on the Closing Date, Buyer shall assume
the Assumed Liabilities. Buyer shall not assume any of the Excluded
Liabilities.
ARTICLE III
--------------
Purchase Price
--------------
Section III.01 Purchase Price. (a) The purchase price to be
paid by Buyer for the Purchased Assets and the assumption of the
obligations of Sellers under the Assigned Agreements and the assumption of
the Assumed Liabilities (the "Purchase Price") shall be an amount equal to
the sum of $93,841,000.00 (Ninety Three Million Eight Hundred and Forty-One
Thousand Dollars), the sum of the Net Assets Acquired as of May 3, 1997 as
set forth on Exhibit 3.01(a)(1), and $42,275,000.00 (Forty-Two Million Two
Hundred and Seventy-Five Dollars) (the "Closing Payment"), as adjusted
pursuant to Section 3.01(c) with such Purchase Price plus, the purchase
price of any Fixed Assets acquired in accordance with Section 8.01(m). All
payments in respect of the Purchase Price shall be allocated in accordance
with the allocation of the Purchase Price as set forth on Exhibit
3.01(a)(2).
(b) Payment of Purchase Price. On the Closing Date, payment of
the Purchase Price shall be made by Buyer as follows:
(i) $126,116,000.00 (One Hundred Twenty-Six Million Five
Hundred Thousand Dollars) (the "Direct Payment") shall be paid by Buyer by
wire transfer of immediately available funds to such single account as may
be designated by Sellers;
(ii) $10,000,000 of immediately available funds shall be
deposited by Buyer (the "Escrow Deposit") in accordance with the terms and
conditions of an escrow agreement substantially in the form of Exhibit A-2
(the "Escrow Agreement") among Buyer, XLSource and the Escrow Agent.
(c) Post-Closing Adjustment to Closing Payment. (i) Not more
than forty-five (45) days following the Closing Date, XLSource shall
deliver to Buyer the unaudited combined statement of assets and liabilities
of the Business as of the Closing Date (the "Closing Date Balance Sheet").
The Closing Date Balance Sheet shall (x) fairly present the combined
financial position of the Business as of the close of business on the
Closing Date in accordance with generally accepted accounting principles
applied on a consistent basis with those used in the preparation of the
February 1 Balance Sheet as adjusted as set forth on Exhibit 3.01(a)(1),
(y) include line items (including the constituent components thereof)
consistent with those in the February 1 Balance Sheet as adjusted as set
forth on Exhibit 3.01(a)(1) and (z) be subject to adjustment as set forth
on Exhibit 3.01(c). A physical count of the Inventory shall be conducted
jointly by Buyer and Sellers immediately prior to the Closing Date (the
"Closing Date Physical Count").
(ii) Within thirty (30) days after receipt of the Closing Date
Balance Sheet, Buyer shall communicate in writing to XLSource any objection
or disagreement that it may have to such statements and adjustments which
communication shall state with reasonable specificity the basis for such
objection or disagreement (an "Objection"). Buyer may not assert an
Objection with respect to (i) collectability of Receivables or (ii)
Inventory, except based on a disparity between the Closing Date Physical
Count and Sellers' inventory as reflected in its financial records as of
the Closing Date. XLSource shall have five (5) days after receipt of an
Objection in which to respond in writing to such Objection. If, after five
(5) days following such five (5) day period, Buyer and XLSource have not
resolved the matter in dispute, such matter shall be submitted to Deloitte
& Touche LLP (or any other independent certified public accountants, as
Buyer and XLSource may agree) for determination. Such determination shall
be made within thirty (30) days after such matter was submitted (the "Final
Determination") and shall be final, binding on and not appealable by Buyer,
Sellers and Shareholder. The cost of such accountants shall be paid one-
half by Buyer and one-half by Sellers.
(iii) Within two (2) business days after the earliest of (A)
Buyer's written acceptance of the Closing Date Balance Sheet as prepared by
Sellers or failure to communicate an Objection within the time provided in
Section 3.01(c)(ii), (B) Buyer and XLSource's resolution of any dispute
respecting the Closing Date Balance Sheet by mutual agreement or (C) Buyer
and XLSource's receipt of the Final Determination, Sellers and Shareholder,
jointly and severally, agree to repay to Buyer (or, if such amount is
negative, Buyer agrees to pay to Sellers) an amount equal to (x) the Net
Assets Acquired as of May 3, 1997 as set forth on Exhibit 3.01(a)(1) minus
(y) the Net Assets Acquired as of the Closing Date (the "Post-Closing
Adjustment"). Such repayment by Sellers and Shareholder or payment by
Buyer, as applicable, shall be made by check, subject to collection, or if
the amount of such payment exceeds $50,000, by wire transfer, in either
case, delivered to the party entitled to receive such payment. If such
payment shall be made to Buyer, it shall be made pursuant to the terms of
the Escrow Agreement out of funds contained in the Escrow Account, or if
such funds are insufficient, any remaining balance after payment of such
funds shall be paid by Sellers and Shareholder. If such payment shall be
made to Sellers, it shall be allocated among Sellers in accordance with the
allocation of the Purchase Price as set forth on Exhibit 3.01(a)(2);
provided, that Buyer shall not be obligated to make payment to more than
one account.
ARTICLE IV
----------
Closing
-------
Section IV.01 The Closing Date. The closing of the purchase and
sale of the Purchased Assets and the assumption of the obligations of
Sellers under the Assigned Agreements and the assumption of the Assumed
Liabilities (the "Closing") shall take place at the offices of Dewey
Ballantine, 1301 Avenue of the Americas, New York, NY 10019, at 10:00 a.m.
New York time, on July 15, 1997 or such other time, date or place as
Sellers, Shareholder and Buyer may mutually agree (the "Closing Date").
Section IV.02 Certificates, Instruments of Transfer, Etc.
(a) Sellers and XLConnect agree that the sale and transfer of the
Purchased Assets shall be made by the Assignment Agreement, bills of sale
and other instruments of transfer acceptable to Buyer on the one hand and
Sellers or XLConnect, on the other hand, as applicable. Sellers and Buyer
agree to use reasonable efforts to minimize any sales, use, transfer and
similar transaction taxes and other transaction costs, provided that such
efforts shall not expose either party to any additional cost or risk.
Sellers and Shareholder jointly and severally agree to pay such taxes, if
any.
(b) Unless XLSource has repurchased such Receivables as provided
in Section 8.10, from and after the Closing Date, Buyer shall have the
right and the authority to collect for its own account all Receivables
which shall be transferred to Buyer as provided herein and to endorse with
the name of Sellers (or Shareholder, if applicable) any checks received on
account of such Receivables. Unless XLSource has repurchased such
Receivables as provided in Section 8.10, from and after the Closing Date,
Sellers and Shareholder will, promptly following receipt thereof, transfer
and deliver to Buyer any cash or other property that it may receive in
respect of such Receivables and until so transferred and delivered the same
shall be deemed to be held in trust for Buyer. Unless XLSource has
repurchased such Receivables as provided in Section 8.10, from and after
the Closing Date, Buyer shall also have the right to compromise, settle and
obtain the release of all claims and liabilities related to the Assigned
Agreements; provided, however, any claim for indemnification by Buyer
pursuant to Section 8.03 with respect to any such release shall require
compliance with the indemnification procedures as set forth in Section 8.03
and the foregoing acknowledgment shall not in any manner release Buyer from
any obligations under said Section 8.03. From and after the Closing Date,
Buyer shall have the right to open all mail and packages and receive all
communications and deliveries addressed to Shareholder or Sellers at the
Acquired Sites. Buyer will promptly deliver or cause to be delivered to
Shareholder all such opened mail and packages, and received communications
and deliveries addressed to Shareholder or Sellers at the Acquired Sites
which does not pertain to the Business. Sellers and Shareholder will
promptly deliver or cause to be delivered to Buyer any mail, packages,
communications or deliveries made to the Other Sites on and after the
Closing Date and related to the Business.
(c) Buyer agrees to assume the Assumed Liabilities by delivery
of the Assignment Agreement.
(d) XLConnect, Sellers and Shareholder agree that, at any time
and from time to time after the Closing Date, they will, upon request and
at Buyer's expense, execute, acknowledge and deliver, all such further
reasonable deeds, assignments, transfers and conveyances as may be required
for the better assigning, transferring, granting and conveying to Buyer of
any of the Purchased Assets.
(e) Buyer agrees that, at any time and from time to time after
the Closing Date, it will, upon request and at the Sellers' or XLConnect's
expense, execute, acknowledge and deliver, or cause to be executed,
acknowledged or delivered, all such further reasonable assumptions as may
be required for the better confirming to Sellers or XLConnect, as
applicable, the assumption by Buyer of the Assumed Liabilities.
ARTICLE V
---------
Representations and Warranties
------------------------------
Section V.01 Representations and Warranties of Sellers and
Shareholder. Sellers and Shareholder, jointly and severally, represent and
warrant to Buyer all of the following except as and to the extent expressly
disclosed in Exhibits to this Agreement, with reference to the
corresponding paragraph of this Section 5.01 to which each disclosure
relates:
(a) Organization, Good Standing and Capitalization. Shareholder
and each Seller is a corporation duly organized, validly existing and in
good standing under the laws of the state or commonwealth listed below:
The Future Now, Inc. Ohio
XLSource, Inc. Arkansas
E-C Computer Technical Services, Inc. Texas
RCK Computers, Inc. Texas
Intelligent Electronics, Inc. Pennsylvania
Shareholder and each Seller has all requisite corporate power to carry on
its business as it is now being conducted, and is duly qualified to do
business as a foreign corporation in each jurisdiction where failure to
qualify would have a material adverse effect on the Business. Sellers have
no subsidiaries, except that (i) XLSource, Inc is a wholly-owned subsidiary
of The Future Now, Inc., (ii) XLSource owns eighty percent (80%) of the
issued and outstanding shares of capital stock of XLConnect Solutions, Inc.
and (iii) XLConnect owns all of the issued and outstanding shares of
capital stock of XLConnect Services, Inc. and XLConnect Systems, Inc.
(b) Stock Ownership. Except as set forth in Exhibit 5.01(b),
Shareholder is the beneficial and record owner of all of the shares of
capital stock of The Future Now, Inc., E-C Computer Technical Services,
Inc. and RCK Computers, Inc. and The Future Now, Inc. is the beneficial and
record owner of all of the shares of capital stock of XLSource, in each
case, free and clear of any Encumbrance of any nature whatsoever.
(c) Corporate Authorization. The execution, delivery and
performance by Shareholder and each Seller of this Agreement, the Escrow
Agreement, the Assignment Agreement, and the bills of sale, assignments and
other instruments of transfer referred to in this Agreement to which it is
a party have been authorized and approved by all requisite corporate action
on the part of Shareholder and each Seller, and no other corporate approval
or authorization (including, without limitation, by the shareholders of
Shareholder or each Seller) is required on the part of Shareholder or each
Seller, any trustee, or any other person by law or otherwise in order to
make this Agreement, the Escrow Agreement, the Assignment Agreement, the
Transition Services Agreement and the bills of sale, assignments and other
instruments of transfer referred to in this Agreement and constitute the
valid, binding and enforceable obligations of Shareholder and each Seller
(subject to the execution and delivery of such agreements (other than this
Agreement) and to the receipt of required consents to assignments of the
Assigned Agreements) except as enforcement thereof may be limited by
bankruptcy, insolvency, or other similar laws affecting the enforcement of
creditors' rights in general or by general principles of equity.
(d) Purchased Assets; Business. The Purchased Assets constitute
all of the assets of Shareholder and Sellers used by Shareholder and
Sellers in the conduct of the Business at the Acquired Sites and certain of
such assets used at the Other Sites (subject to Section 8.02), but
excluding the Excluded Intangibles. True and complete copies of the
Assigned Agreements have been furnished to Buyer.
(1) Neither Sellers nor Shareholder is in default (and
no event or circumstance exists which, with notice or lapse of time or
both, would constitute a default by Sellers or Shareholder) in any material
respect under any of the Assigned Agreements and, to the best knowledge of
Sellers and Shareholder, no other party to the Assigned Agreements is in
default with such agreements. Each Assigned Agreement is in full force and
effect. Sellers and Shareholder have the right to assign the Assigned
Agreements to which each is a party, subject to restrictions on assignment
contained in the Assigned Agreements and indicated on
Exhibit 5.01(d)(1)(A), and neither Sellers nor Shareholder has otherwise
assigned, pledged or encumbered its interest in the Assigned Agreements to
which it is a party except for the assignment of the Services Portions
thereof to XLConnect. No obligation of Sellers or Shareholder under any
Assigned Agreement is in excess of the normal, ordinary and usual
requirements of Shareholder or Sellers or at other than an arms-length
price. Except as set forth on Exhibit 5.01(d)(1)(A), no Assigned Agreement
obligates Sellers or Shareholder to sell or deliver any product or service
at a price (after taking into account vendor rebates and other vendor
funds) which does not cover the cost together with Sellers' customary
profit margin for such product or service in the light of the amount of
product or service provided and the type of customer involved.
Exhibit 5.01(d)(2) sets forth a backorder report for the Business. None of
the Assigned Agreements contains any agreement, understanding, or
relationship arising out of or relating to Sellers' status as a "small
business concern," a "minority-owned business concern" or other similar
status.
(2) Sellers' interest in each Acquired Site is a valid
and subsisting leasehold interest in each such Acquired Site pursuant to
the applicable Lease, and each such Lease affords the tenant thereunder the
legal right to occupy such Acquired Site as of the Closing Date in
accordance with the terms thereof. The Leases are valid and enforceable by
Sellers or Shareholder, and Sellers or Shareholder believe that at the time
each Lease was executed the rentals payable by the tenant under each Lease
were fair market value rentals for the property subject thereto. Sellers
and Shareholder have performed all the obligations required to be performed
by them under the Leases and possess and quietly enjoy the premises under
the Leases. Neither Sellers nor Shareholder has received notice of any
pending or threatened condemnation proceedings relating to all or any
portion of the property or premises that are the subject of the Leases and,
so far as known to Sellers and Shareholder, there are no such pending or
threatened proceedings. The structures, tangible properties and equipment
owned, operated or leased by Sellers or Shareholder in connection with the
Business are used and useable by Sellers in the present conduct of the
Business.
(3) No real property is owned by Sellers or Shareholder
in the Business as presently conducted.
(4) Sellers have good, indefeasible and marketable title
to the Inventory, Receivables, Fixed Assets and Customer Data, which at
Closing will be free and clear of all Encumbrances, other than Encumbrances
arising out of Assumed Liabilities. The Receivables constitute valid
claims against the account debtors with respect thereto. Except for
Inventory that is being configured and assembled for customer use and
Inventory owned by E-C Computer Technical Services, Inc. and RCK Computers,
Inc., the Inventory is new, unused, undamaged, unopened product in its
original packaging and treated by the manufacturer thereof as its current
product and valued in the Sellers' inventory records at the lower of
Sellers' cost and the manufacturers' or distributors' current pricing
levels, as the case may be, in each case subject to applicable reserves.
Inventory on the Closing Date will be determined on the basis of the
Inventory physically located at the Acquired Sites and the Other Sites (or
in transit or storage) at such time and not on the basis of accounting
records. Inventory shall not include property, products, fixtures and
equipment used in the day-to-day operation of the Business or any of the
Other Property.
(5) Exhibit 5.01(d)(5) lists the Acquired Sites and the
Other Sites and lists the Inventory, Receivables and Other Property as of
May 3, 1997, located at or attributable to each such Acquired Site or Other
Site, as the case may be. All Purchased Assets are located at the Acquired
Sites and the Other Sites.
(6) Each of the Assumed Liabilities has been incurred by
Shareholder or Seller in the ordinary course of business and will be
properly accrued on the Closing Date Balance Sheet in accordance with GAAP.
(e) Litigation. Except as set forth on Exhibit 5.01(e), there
is no litigation, action, suit, tax audit, proceeding or investigation
pending or, to Shareholder's or Sellers' Knowledge, threatened with respect
to the Business, any of the Purchased Assets or any of the transactions
contemplated hereby before or by any Federal, state, municipal or other
governmental department, commission, board, bureau, agency or
instrumentality, or any other entity, which, if adversely determined, could
have a material adverse impact upon (i) the Purchased Assets taken as a
whole or (ii) the conduct by Buyer after the Closing Date of a business at
the Acquired Sites or in the geographic area in which the Other Sites are
located substantially similar to the Business. Neither Sellers nor
Shareholder is in default with respect to any order, writ, injunction or
decree of any court or Federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality which, if
not cured, could have a material adverse impact upon (i) the Purchased
Assets taken as a whole or (ii) the conduct by Buyer after the Closing Date
of a business at the Acquired Sites or in the geographic area in which the
Other Sites are located substantially similar to the Business of Sellers.
(f) No Conflict. Except as set forth on Exhibit 5.01(f), the
execution by Shareholder and Sellers of this Agreement, the Escrow
Agreement, the Assignment Agreement, and the bills of sale, assignments and
other instruments of transfer referred to in this Agreement, in each case,
to which each such person or entity is or will be a party, compliance by
Shareholders and Sellers with the provisions of this Agreement and the
other such agreements to which each such person or entity will be a party
and the consummation by Shareholder and Sellers of the transactions
contemplated hereby or thereby (i) will not violate in any material respect
any provision of applicable law to which Shareholder or Sellers are
subject, (ii) will not conflict with any provision of the Articles of
Incorporation or By-laws of Shareholder or Sellers, (iii) will not conflict
with or constitute a default (or with notice or lapse of time or both,
constitute a default) under, or result in the termination of, or accelerate
the performance required by any of the terms, conditions or provisions of
any contract, agreement or other instrument binding on Sellers or
Shareholder, (iv) will not result in the creation of any Encumbrance upon
any of the Purchased Assets, (v) do not require the consent or approval of,
or registration, declaration or filing with, any court, administrative
agency or commission or other governmental authority or instrumentality,
except for compliance with the requirements of the HSR Act and any filings
under state laws required in connection with the conveyance of the
Receivables and vehicles, and (vi) do not violate any order, writ,
injunction, decree, arbitral award, statute, rule or regulation applicable
to either Shareholder or Sellers, to any of the Purchased Assets or to the
Business, violation of which could have a material adverse impact upon
Buyer or the conduct by Buyer after the Closing Date of a business
substantially similar to the Business.
(g) No Other Agreements to Sell Assets or Business. Except for
this Agreement, neither Sellers nor Shareholder has any legal obligation,
absolute or contingent, to any other person or firm to sell the assets used
in the Business (other than sales in the ordinary course of business), to
issue or sell any capital stock or any security convertible into or
exchangeable for capital stock of any Seller or to effect any merger,
consolidation or other reorganization of any Seller or to enter into any
agreement with respect thereto.
(h) Articles of Incorporation and By-laws. Sellers have
delivered to Buyer copies of Shareholder's and Sellers' Articles of
Incorporation and By-laws (certified as of the date hereof by its
respective corporate secretary), which copies are complete and correct as
of the date hereof.
(i) Financial Statements. (a) Sellers have delivered to Buyer
true and complete copies of the following balance sheets and related
statements of income: (i) for XLSource - balance sheets as of February 1,
1997 and related income statement for the fiscal year ended February 1,
1997, all of which are unaudited; (ii) for RCK Computers, Inc. - balance
sheet as of October 31, 1996 and related income statement for the ten
months ended October 31, 1996, which have been audited by Price Waterhouse
LLP and balance sheet as of May 3, 1997 and related income statement for
the period beginning December 31, 1996 and ending May 3, 1997, which are
unaudited; (iii) for E-C Computer Technical Services, Inc. - balance sheet
as of September 30, 1996 and related income statement for the nine months
ended September 30, 1996, which have been audited by Price Waterhouse LLP
and balance sheet as of May 3, 1997 and related income statement for the
period beginning October 23, 1996 and ending May 3, 1997, which are
unaudited; and (iv) unaudited monthly financial statements of Sellers for
each month ending after February 1, 1997 and prior to the date hereof and
for the quarter ended May 3, 1997, each of which annual and monthly
statements has been prepared in accordance with GAAP applied on a
consistent basis (in the case of the monthly financial statements, subject
to year end adjustments) and presents fairly the financial position of the
Sellers and the results of the operations of the Sellers as of its date and
for the fiscal year or period to which such statement pertains, subject to
the exceptions set forth on Exhibit 5.01(i).
(b) Sellers have delivered to Buyer true and complete copies of
a combined and combining statement of assets and liabilities of the
Business as of February 1, 1997 and May 3, 1997 and combined and combining
statements of revenue and expenses of the Business for each of the five
fiscal quarters ended February 3, 1996 through May 3, 1997, each of which
combined and combining statements has been prepared in accordance with GAAP
applied on a consistent basis, subject to exceptions as set forth on
Exhibit 5.01(i), and presents fairly the financial position of the Business
and the revenues and expenses of the Business as of its date and for the
period ended to which such statement pertains, as the case may be.
(j) Absence of Undisclosed Liabilities and Obligations. Except
as disclosed in Sellers' February 1, 1997 ("February 1 Balance Sheet Date")
combined statement of assets and liabilities ("February 1 Balance Sheet")
and liabilities incurred since the February 1 Balance Sheet Date and either
set forth on Exhibit 3.01(a)(1) or incurred in the ordinary course of
business consistent with past practices after February 1, 1997, which
liabilities, if not discharged prior to the Closing Date, will appear on
the Closing Date Balance Sheet, to the extent required by generally
accepted accounting principles consistently applied, except as disclosed on
Exhibit 3.01(a)(1) and 5.01(i) neither Sellers nor the Business has any
liabilities or obligations (whether accrued, absolute, contingent or
otherwise) of a nature required to be reflected in a balance sheet of
Sellers or the Business prepared in accordance with GAAP or disclosed in
the notes thereto, including, without limitation, any Taxes due or to
become due.
(k) Tax Matters. Shareholder and Sellers and any Affiliates of
Shareholder and Sellers have: (i) correctly prepared and timely filed
(including any applicable extension periods) all returns, declarations,
reports, estimates, information returns and statements ("Returns") required
to be filed or sent by or with respect to the Business in respect of any
Taxes; (ii) timely and properly paid all Taxes that are due and payable;
(iii) established on its books and records reserves that are adequate for
the payment of all Taxes not yet due and payable; and (iv) complied with
all applicable laws, rules and regulations relating to the payment and
withholding of Taxes and has timely and properly withheld from employee
wages and paid over to the proper governmental authorities all amounts
required to be so withheld and paid over under all applicable laws. There
are no liens for Taxes upon the assets of Sellers or Shareholder with
respect to the Business except liens for Taxes not yet due. Neither
Shareholder nor Sellers is a party to any agreement providing for the
allocation, sharing or indemnification of Taxes with respect to the
Business, except the Tax Allocation Agreement among Shareholder, XLSource,
The Future Now, Inc. and certain other subsidiaries of Shareholder and
Sellers effective as of January 29, 1995 and Buyer shall have no rights or
obligations under or with respect to such agreement.
(l) No Brokers. Neither Shareholder nor Sellers has made
contact or had any dealings with or entered into, and will not enter into,
any agreement, arrangement or understanding with any broker, leasing agent,
finder or similar person or entity with respect to this Agreement and the
transactions contemplated hereby which will result in the obligation of
Buyer to pay any finder's fee, brokerage commission or similar payment in
connection with the transactions contemplated hereby.
(m) Employee Benefit Information. (a) Exhibit 5.01(m) contains
an accurate and complete list of all Sellers Benefit Plan. None of
Shareholder, Sellers or any Subsidiary or ERISA Affiliate of either is or
ever has been obligated to make contributions to a "multiemployer plan", as
defined in Section 3(37) of ERISA, or to a benefit plan subject to Title IV
of ERISA. There is no amount or payment arising from or in connection with
any Sellers Benefit Plan with respect to which Buyer is or will be liable
to any Person, including, but not limited to, any Governmental Entity, any
employee of Shareholder, Sellers, or any of their respective ERISA
Affiliates. No individual is a party to an Employment Contract pertaining
to the Business that will be effective on the Closing Date.
(b) (i) Each Employee Pension Benefit Plan listed on Exhibit
5.01(m) that is intended to be qualified under Section 401 of the Code has
received a favorable determination letter from the Internal Revenue Service
with respect to the most recent plan restatement and, to Shareholder's
knowledge, nothing has occurred with respect to such Employee Pension
Benefit Plan that could cause the loss of such qualification or exemption
or the imposition of any material liability, penalty or tax under ERISA or
the Code; (ii) all contributions required to have been made under any
Employee Pension Benefit Plan to any funds or trusts established thereunder
or in connection therewith have been made by the due date thereof
(including any valid extensions) and no lien in favor of any such Employee
Pension Benefit Plan has been imposed under Section 412(n) of the Code or
Section 302(f) of ERISA; (iii) a true, correct, and complete copy of each
of the following documents has been made available to or delivered to Buyer
by Shareholder with respect to each Sellers Benefit Plan that covers any
Sellers Employee: (A) plan document and amendments thereto, if any, and
(B) summary plan description or written description; (iv) neither
Shareholder, Sellers, nor any Subsidiary or ERISA Affiliate of either has
incurred any outstanding liability under Sections 4041, 4042 or 4062 of
ERISA; (v) none of Shareholder or Sellers maintains retiree life insurance
or retiree health plans which are "welfare benefit plans" within the
meaning of Section 3(1) of ERISA and which provide for continuing benefits
or coverage for any participant or any beneficiary of a participant after
such participant's termination of employment where such participant was an
employee of Sellers or any of its Subsidiaries; (vi) neither Shareholder
nor Sellers nor any Subsidiary or ERISA Affiliate of either or any
organization to which any of them is a successor or parent corporation,
within the meaning of Section 4069(b) of ERISA, has engaged in any
transaction described in Section 4069 of ERISA; (vii) Sellers has not, and
prior to the Closing Date will not have, suffered a "plant closing" or
"mass layoff" with respect to the Business within the meaning of WARN and
Shareholder and Sellers will provide Buyer, upon request, with such
information as shall be necessary for Buyer to determine its potential WARN
liability; (viii) all Sellers Benefit Plans have been maintained, in all
material respects, in accordance with their terms and with all provisions
of ERISA (including rules and regulations thereunder) and other applicable
law, neither Shareholder, Sellers or any Subsidiary of either nor any
"party in interest" or "disqualified person" with respect to Sellers
Benefit Plans has engaged in a "prohibited transaction" within the meaning
of Section 4975 of the Code or Title I, Part 4 of ERISA, and each of
Shareholder, Sellers and each Subsidiary or ERISA Affiliate of either has
substantially and in good faith complied with the notice and continuation
requirements of COBRA and the regulations thereunder; (ix) except as
provided in Section 8.11, neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby will
(A) result in any payment (including, but not limited to, severance,
unemployment compensation, golden parachute or other payments) becoming due
to any Company Personnel listed on Exhibit 5.01(q)(1) under any Sellers'
Benefit Plan or otherwise, (B) increase any benefits otherwise payable
under any Sellers Benefit Plan or (C) result in the acceleration of the
time of payment or vesting of any such benefits; (x) Sellers are not liable
for any obligations to any employees of Sellers who retired or terminated
employment on or prior to the Closing; (xi) no Transferred Employee is
covered by a long-term incentive plan; (xii) none of Shareholder, Sellers
or any of their Subsidiaries has any contract, plan or commitment, whether
legally binding or not, to create any additional Sellers Benefit Plan or to
modify any existing Sellers Benefit Plan.
(c) (i) None of the Sellers Employees listed on Exhibit
5.01(q)(1) nor any other employee of Sellers is represented in his or her
capacity as an employee of Shareholder or Sellers by any labor
organization; (ii) neither Sellers nor Shareholder, with respect to any
Sellers Employee listed on Exhibit 5.01(q)(1) has recognized any labor
organization nor has any labor organization been elected as the collective
bargaining agent of any of such employees, nor has Sellers or Shareholder,
with respect to any of the Sellers Employees listed on Exhibit 5.01(q)(1),
entered into any collective bargaining agreement or union contract
recognizing any labor organization as the bargaining agent of any of its
employees; (iii) there is no union organization activity involving any of
the Sellers Employees listed on Exhibit 5.01(q)(1), pending or threatened,
nor has there ever been union representation involving any of the Sellers
Employees listed on Exhibit 5.01(q)(1); (iv) there is no picketing, pending
or threatened, and there are no strikes, slowdowns, work stoppages, other
job actions, lockouts, arbitrations, grievances or other labor disputes
involving any of the Sellers Employees listed on Exhibit 5.01(q)(1),
pending or threatened; (v) Sellers are in compliance in all material
respects with all applicable laws respecting employment and employment
practices, terms and conditions of employment and wages and hours, and is
not engaged in any unfair labor practice; (vi) Sellers have not been
notified of any unfair labor practice charge or complaint against Sellers
pending or to the knowledge of Sellers and Shareholder, no such charge or
complaint is threatened before the National Labor Relations Board, any
state labor relations board or any court or tribunal; and (vii) except as
set forth on Exhibit 5.01(q)(1), Sellers have not been notified of any
charge or claim filed at or with the Equal Employment Opportunity
Commission, any state agency having similar jurisdiction or any court or
tribunal, actually pending and, to the knowledge of Sellers and
Shareholder, no such charge or claim is threatened against Sellers in
connection with the operation of the Business.
(n) Environmental Compliance. (i) Neither Sellers nor
Shareholder has been notified that Sellers or Shareholder is, and neither
Sellers nor Shareholder knows of or suspects that Sellers or Shareholder
is, in violation, or alleged to be in violation, of any Environmental Laws
which would have a material adverse effect on the Business.
(ii) Neither Sellers nor Shareholder has received a
notice, complaint, order, directive, claim or citation from any third
party, including, without limitation, any Federal, state or local
governmental authority with respect to the Business, (A) that any Hazardous
Materials which Sellers or Shareholder has generated, stored, transported
or disposed of has been released at any site at which a Federal, state or
local agency has conducted or has ordered that any person conduct a
remedial investigation, removal or other response action pursuant to any
Environmental Law or has named Sellers or Shareholder as a potentially
responsible party; or (B) that Seller or Shareholder is or shall be a named
party to any claim, action, cause of action, complaint, or legal or
administrative proceeding (in each case, contingent or otherwise) arising
out of any third party's incurrence of costs, expenses, losses or damages
of any kind whatsoever in connection with the release of Hazardous
Materials.
(iii) (A) to the Knowledge of Sellers and Shareholder, no
portion of the Acquired Sites has been used for the handling, processing,
storage or disposal of Hazardous Materials except in accordance with
applicable Environmental Laws; and no underground tank or other underground
storage receptacle for Hazardous Materials is located on any portion of any
Acquired Site; (B) in the course of any activities with respect to the
Business conducted by Sellers or Shareholder or operators of Sellers' or
Shareholder's properties, no Hazardous Materials have been generated or are
being used on the Acquired Sites except in accordance with applicable
Environmental Laws; (C) to the Knowledge of Sellers and Shareholder, there
have been no releases (i.e., any past or present releasing, spilling,
leaking, leaching, pumping, pouring, emitting, emptying, discharging,
injecting, escaping, disposing or dumping) or threatened releases of
Hazardous Materials on, upon, into or from the Acquired Sites, which
releases would have a material adverse effect on the value of any of the
property or adjacent properties or the environment; and (D) in addition,
any Hazardous Materials that have been generated or stored on any of the
Acquired Sites have been transported off site only by carriers having the
authorization of the Environmental Protection Agency or any other competent
Federal, state or municipal authority and treated or disposed of only by
treatment or disposal facilities maintaining valid permits as required
under applicable Environmental Laws, which transporters and facilities have
been and are, to the best of Sellers' and Shareholder's Knowledge,
operating in compliance with such permits and applicable Environmental
Laws.
(iv) The execution, delivery and performance of this
Agreement and the other agreements and instruments referred to or
contemplated herein to which Sellers or Shareholder is or will be a party,
and the transfer of the Purchased Assets by Sellers to Buyer, are not
subject to any Environmental Laws which condition, restrict or prohibit the
sale, lease or other transfer of property or operations.
(v) Sellers and Shareholder have provided to Buyer all
environmentally related audits, studies, reports, analyses (including soil
and groundwater analyses), and results of investigations that have been
performed with respect to the Acquired Sites.
(vi) There is not now nor, to the knowledge of the Sellers
and Shareholder, has there been located at any of the Acquired Sites
asbestos containing material or equipment containing polychlorinated
biphenyls.
(vii) Sellers currently hold, and at all times have held,
all required federal, state, and municipal permits, licenses, certificates
and approvals necessary for the Acquired Sites ("Environmental Permits").
Neither Sellers nor Shareholder has been notified by any relevant
governmental authority that any Environmental Permits will be modified,
suspended, cancelled or revoked, or cannot be renewed in the ordinary
course of business or that Sellers or Shareholder is a potentially
responsible party under any Environmental Laws.
(o) Insurance. Sellers maintain and have in full force and
effect the insurance policies described in Exhibit 5.01(o) covering the
Purchased Assets and the Business. Copies of the insurance policies
covering the Purchased Assets and the Business have been provided to Buyer.
(p) Intangible Assets; Confidentiality Agreements. (1) The
Intellectual Properties listed on Exhibit 5.01(d)(1)(D) are all those used
or being developed for use in the Business or necessary for the conduct of
the Business other than the Excluded Intangible Assets and other than those
which are individually and in the aggregate not material to the operations
of the Business. Other than as disclosed in Exhibit 5.01(d)(1)(D), Sellers
own all Intellectual Properties listed on Exhibit 5.01(d)(1)(D) hereto.
Neither Sellers nor Shareholder have sent or otherwise communicated to any
other person any notice, charge, claim or assertion of, or has any
knowledge of, any present, impending or threatened infringement by such
other person of any Intellectual Properties, by such other person.
(2) Exhibit 5.01(p)(2) contains a complete and correct
identification of all confidentiality agreements currently in effect to
which Shareholder or Sellers is a party as of the date of this Agreement
which relate to the Business, other than customary confidentiality
provisions in the Assigned Agreements or in reseller agreements that are
not Assigned Agreements.
(q) Employees. Exhibit 5.01(q)(1) sets forth the name,
location, title, date of employment, salary, bonus (and any changes in
salary or bonus since February 1, 1997) of each Sellers Employee as of May
3, 1997. Exhibit 5.01(q)(2) sets forth (a) the name of each Sellers
Employee who was employed by any Seller on February 1, 1997 and who is
employed by XLConnect on the date hereof, (b) each person who was employed
by XLConnect on February 1, 1997 and who is a Sellers Employee on the date
hereof and (c) each Sellers Employee who has left the employ of Sellers
since February 1, 1997. Except as described on Exhibit 5.01(q)(1), no
Sellers Employee is a party to a confidentiality agreement or non-
competition agreement with Sellers, Shareholder or any of their respective
Affiliates (including, without limitation, XLConnect). To the Knowledge of
Sellers and Shareholder, since May 3, 1997 no Sellers Employee has provided
notice to Shareholder or Sellers of his or her intention to terminate his
or her relationship with Sellers. Neither Shareholder nor Sellers has
Knowledge of any plan of any Sellers Employee to do so. Exhibit 5.01(q)(3)
sets forth the head count for Sellers Employees by function and name as of
February 1, 1997 and May 3, 1997.
(r) Compliance with Laws. Shareholder and Sellers have complied
in all material respects with all applicable statutes, regulations, orders,
ordinances and other laws of the United States of America, all state, local
and foreign governments and other governmental bodies and authorities, and
agencies of any of the foregoing relating to the Business to which they are
subject and any undertakings of Shareholder or Sellers to any of the
foregoing. Neither Shareholder nor any Seller has received any notice to
the effect that, or otherwise been advised that, it is not in compliance
with any of such statutes, regulations and orders, ordinances, other laws
or undertakings, and neither Sellers nor Shareholder has any reason to
anticipate that any presently existing circumstances are likely to result
in violations of any such regulations which could, in any one case or in
the aggregate, cause a material loss to Sellers or otherwise have a
material adverse effect on the Business. To Sellers' Knowledge, there is
not presently pending any proceeding, hearing or investigation with respect
to the adoption of amendments or modifications to existing laws or
ordinances, regulations or restrictions which, if adopted, would materially
adversely affect the Business.
(s) Transactions with Certain Persons. Except as set forth on
Exhibit 5.01(s), no executive officer or director or employee of Sellers or
Shareholder or, to the Knowledge of Sellers or Shareholder, a member of
such persons' immediate family is presently a party to any transaction with
Sellers relating to the Business, including, without limitation, any
contract, agreement or other arrangement (i) providing for the furnishing
of services by, (ii) providing for the rental of real or personal property
from, or (iii) otherwise requiring payments to (other than services as
officers, directors or employees) any such person or corporation,
partnership, trust or other entity in which any such person has a
substantial interest as a shareholder, officer, director, trustee or
partner.
(t) Clients; Relationship with Accounts. No client, customer or
supplier of Sellers has provided written notice to Sellers of its intention
to terminate its relationship with Sellers or to substantially reduce the
amount of business it provides to Sellers. Neither Sellers nor Shareholder
has Knowledge of any plan of any client, customer or supplier to do so.
Attached hereto as Exhibit 5.01(t) is a true, complete and accurate list of
Sellers' twenty largest accounts with respect to the Business (in terms of
net revenues) during the twelve (12) month period ending on February 1,
1997.
(u) Absence of Certain Changes or Events. Except as set forth
on Exhibit 5.01(u) or as disclosed in the May 3 Balance Sheet, since
February 1, 1997, there has not been any:
(i) change in the financial condition, assets, liabilities,
earnings or business of Sellers, except for changes which have been in the
ordinary course of business and which have not, individually or in the
aggregate, been materially adverse to the Business;
(ii) change in the number of shares of capital stock of any
Seller issued and outstanding or any declaration, setting aside, or payment
of any dividend or other distribution (whether in cash, securities,
property or otherwise) in respect of any Seller's capital stock;
(iii) (A) increase in the compensation payable or to become
payable by any Seller to any Sellers Employee, (B) any bonus, incentive
compensation, service award or other like benefit, granted, made or
accrued, contingently or otherwise, to or to the credit of any Sellers
Employee, or (C) any employee welfare, pension, retirement, profit-sharing
or similar payment or arrangement (whether or not subject to ERISA) made or
agreed to by any Seller except pursuant to the existing plans and
arrangements described in Exhibit 5.01(m) hereto;
(iv) significant labor trouble, or any material controversies or
material unsettled grievances threatened between any Seller and any Company
Personnel or a collective bargaining organization representing or seeking
to represent Company Personnel;
(v) addition to or modification or amendment of the Sellers
Benefit Plan other than (A) contributions made for the fiscal year ended
February 1, 1997 in accordance with the normal practices of Sellers and
Shareholder or (B) the extension of coverage to other Company Personnel who
became eligible after February 1, 1997;
(vi) mortgage, pledge or subjection to any Encumbrance of any of
Seller's or Shareholder's assets used in the Business, except the lien of
Taxes not yet due and payable;
(vii) sale, assignment or transfer of any assets of Sellers or
Shareholder that are material, singly or in the aggregate, to the Business
other than in the ordinary course;
(viii) waiver of any rights of substantial value to Sellers or
Shareholder with respect to the Business whether or not in the ordinary
course of business;
(ix) cancellation or termination by Sellers or Shareholder of
any contract, agreement or other instrument material to the Business to
which Sellers or Shareholder is or was a party;
(x) liability incurred by Sellers or Shareholder with respect to
the Business except liabilities incurred in the ordinary course of
business;
(xi) capital expenditure or the execution of any lease providing
for annual payments with respect to any aspect of the Business or any
incurring of liability therefor in the aggregate in excess of $250,000 or
in excess of $100,000 with respect to any single lease or expenditure;
(xii) borrowing of money by Sellers or Shareholder with respect
to the Business or guaranteeing of any indebtedness of others with respect
to the Business except in the ordinary course of the Business;
(xiii) lending of any money or otherwise pledging the credit of
Sellers with respect to the Business;
(xiv) failure to conduct the Business in the ordinary course;
(xv) change in the method of accounting or accounting practice
of Sellers or Shareholder with respect to the Business;
(xvi) except as set forth in Exhibit 5.01(q)(2), loss of
services of any Sellers Employee;
(xvii) cancellation by any supplier, customer or contractor
which is material to the Business;
(xviii) extraordinary item of loss (as defined in Opinion No. 30
of the Accounting Principles Board of the American Institute of Certified
Public Accountants); or
(xix) agreement by Sellers or Shareholder to do any of the
foregoing.
(v) Disclosure. The representations of Sellers and Shareholder
in this Agreement or in any Exhibit hereto, do not include any untrue
statement of a material fact or omit to state a material fact necessary in
order to make the statements included therein or herein, in the light of
the circumstances in which they are made, not misleading.
(w) Delivery of Updated Exhibits. Not less than five (5)
business days prior to the Closing Date, Sellers shall have the right to
deliver to Buyer a certificate (the "Sellers Update Exhibits") disclosing
therein any events which have occurred (other than as the result of a
breach by Sellers or Shareholder of their respective covenants and
undertakings made herein) after the date hereof which render untrue and
incorrect any of the representations and warranties made by Sellers and
Shareholder herein and the specific Exhibit to which such update relates
and the disclosure contained in such Sellers Update Exhibits shall be
deemed to qualify and supplement the representation or warranty to which
such disclosure relates, subject in any event to Buyer's right to terminate
this Agreement in accordance with Section 9.02(b).
(x) Officers and Directors with Knowledge. The persons listed
on Schedule A are all those charged with principal operating responsibility
by Shareholder and Sellers for the matters that are the subject of the
representations and covenants contained in this Agreement.
Section V.02 Representations and Warranties of Buyer. Buyer
hereby represents and warrants to Sellers and Shareholder all of the
following except and as to the extent expressly disclosed in Exhibits to
this Agreement, with reference to the corresponding paragraph of this
Section 5.02 to which each disclosure relates:
(a) Organization and Good Standing of Buyer. Buyer is duly
organized and validly existing under the laws of the State of Delaware, and
has all requisite corporate power to carry on its business as it is now
being conducted.
(b) Corporate Authorization. The execution, delivery and
performance by Buyer of this Agreement, the Escrow Agreement, the
Transition Services Agreement and the Assignment Agreement have been duly
and validly authorized and approved by all necessary action on behalf of
Buyer, and Buyer has the power and authority to execute, deliver and
perform this Agreement and to consummate the transactions hereby
contemplated, and no other corporate or stockholder approval or
authorization is required of Buyer by law or otherwise in order to make
this Agreement, the Escrow Agreement, the Transition Services Agreement and
the Assignment Agreement the valid and binding obligations of Buyer (except
any approval required under the HSR Act) enforceable against Buyer in
accordance with its terms, except as enforcement thereof may be limited by
bankruptcy, insolvency, or other similar laws affecting the enforcement of
creditors' rights in general or by general principles of equity.
(c) No Conflict. The execution, delivery and performance by
Buyer of this Agreement, the Escrow Agreement, the Transition Services
Agreement and the Assignment Agreement, compliance by Buyer with the
provisions of this Agreement and the consummation by Buyer of the
transactions contemplated hereby (i) will not violate in any material
respect any provision of applicable law to which Buyer is subject (except
pursuant to the requirements of the HSR Act), (ii) will not conflict with
any provision of the Certificate of Incorporation or By-laws of Buyer or
conflict with or constitute a default (or with notice or lapse of time or
both, constitute a default) under, or result in the termination of, or
accelerate the performance required by any of the terms, conditions or
provisions of any contract, agreement or other instrument binding on Buyer,
which conflict, default, termination or acceleration would have a material
adverse impact upon Buyer, (iii) except for compliance with the
requirements of the HSR Act, does not require the consent or approval of,
or registration, declaration or filing with, any court, administrative
agency or commission or other governmental authority or instrumentality,
and (iv) does not violate any order, writ, injunction, decree, arbitral
award, statute, rule or regulation applicable to Buyer, violation of which
would have a material adverse impact upon Shareholder or Sellers.
(d) No Brokers. Buyer has not made contact or had any dealings
with or entered into, and will not enter into, any agreement, arrangement
or understanding with any broker, leasing agent, finder or similar person
or entity with respect to this Agreement and the transactions contemplated
hereby which will result in the obligation of Shareholder or Sellers to pay
any finder's fee, brokerage commission or similar payment in connection
with the transactions contemplated hereby.
(e) Litigation. There is no action, suit, investigation or
proceeding pending against, or to the knowledge of Buyer threatened against
or affecting, Buyer before any court or arbitrator or any governmental
body, agency or official which in any manner challenges or seeks to
prevent, enjoin, alter or materially delay the Closing.
(f) XLC Common Customer. On the Closing Date, each XLC Common
Customer will be a customer to which Buyer and/or any GECITS Entities,
collectively, provided Computer Services with an aggregate invoice amount
of $25,000 or more in 1996 or in the first six months of 1997 on an
annualized basis.
Section V.03 Representations and Warranties of XLConnect.
XLConnect hereby represents and warrants to Buyer that it (a) has duly
authorized, executed and delivered this Agreement, (b) has good,
indefeasible and marketable title to the Power by the Hour Agreements and
the Purchased Assets related thereto and (c) the revenues for the first
quarter of 1997 with respect to the agreement referred to in item 19A of
Exhibit 5.01(d)(1)(A) were not less than $168,000.
ARTICLE VI
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Conditions Precedent to Obligations of Buyer and Sellers
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Section VI.01 Conditions Precedent to Obligations of Buyer. The
obligation of Buyer to consummate the transactions contemplated by this
Agreement shall be subject to the fulfillment, or the waiver by Buyer, on
or prior to the Closing Date, of the following conditions:
(a) Representations and Warranties True at the Closing Date.
The representations and warranties of Sellers and Shareholder contained in
this Agreement shall be deemed to have been made again at and as of the
Closing Date and shall then be true and correct, subject to Sellers Update
Exhibits as set forth in Section 5.01(w).
(b) Compliance with Covenants. All the terms, covenants,
agreements and conditions of this Agreement to be complied with and
performed by Sellers and Shareholder on or prior to the Closing Date shall
have been duly complied with and performed in all material respects.
(c) Delivery of Closing Documents. Sellers and Shareholder
shall have delivered to Buyer on or prior to the Closing Date all the
documents required to be delivered pursuant to Section 7.01.
(d) Opinion of Sellers' and Shareholder's Counsel. Buyer shall
have received an opinion of Pepper, Hamilton & Scheetz, LLP, counsel to
Sellers and Shareholder, and opinions of Ohio counsel, Arkansas counsel and
Texas counsel to Sellers and Shareholders, each dated the Closing Date and
addressed to Buyer, in form and substance satisfactory to Buyer, to the
effect that:
(i) Shareholder and each Seller is a corporation duly
organized, validly existing and in good standing under the laws of the
state of its incorporation, and has the corporate power to carry on its
business as it is then being conducted;
(ii) Shareholder is the owner of record of all of the
capital stock of each Seller except that The Future Now, Inc. is the owner
of record of all of the capital stock of XLSource.
(iii) Shareholder and each Seller has full corporate
power and authority to enter into this Agreement, the Assignment Agreement,
the Escrow Agreement, the Transition Services Agreement and the bills of
sale, assignments and other instruments of transfer referred to in this
Agreement to which it is a party and to consummate the transactions
contemplated hereby, and all corporate and other proceedings required to be
taken by or on the part of Shareholder and each Seller to authorize it to
enter into this Agreement, the Assignment Agreement, the Escrow Agreement,
the Transition Services Agreement and the bills of sale, assignments and
other instruments of transfer referred to in this Agreement and to
consummate the transactions contemplated hereby have been duly and properly
taken;
(iv) This Agreement, the Escrow Agreement, the
Assignment Agreement, the Transition Services Agreement, the bills of sale,
assignments and other instruments of transfer delivered by Shareholder and
Sellers pursuant to Section 7.01 to which Shareholder or Sellers is or are
a party have been duly executed and delivered by Shareholder or Sellers, as
appropriate, and each constitutes a legal, valid and binding obligation of
Shareholder and Sellers, as the case may be, enforceable in accordance with
its respective terms;
(v) The execution, delivery and performance by
Shareholder and Sellers of the agreements and instruments referred to in
paragraph (iv) above to which Sellers or Shareholder is a party, (A) will
not conflict with or violate any provision of any applicable law, rule or
regulation or any order, writ, injunction or decree known to such counsel,
(B) will not conflict with any provision of the Articles of Incorporation
or By-laws of Sellers or Shareholder and, to the actual knowledge of such
counsel, will not conflict with or result in the breach of any term or
provision of, or constitute a default under, or result in the creation of
any lien, charge or encumbrance upon any of the Purchased Assets pursuant
to, any indenture, mortgage, lease, agreement or other instrument to which
Sellers or Shareholder is a party or by which it is bound and (C) except
for compliance with the requirements of the HSR Act, do not require the
consent or approval of, or registration, declaration or filing with, any
court, administrative agency or commission or other governmental authority
or instrumentality; and
(vi) To the knowledge of such counsel, there is no
action, suit or proceeding pending or threatened in any Federal, state,
municipal or other court, agency or other governmental body seeking to
restrain or prohibit the consummation of the transactions contemplated
hereby, except as described in such opinion;
and as to such other matters as Buyer may reasonably request. Such opinion
may be limited by its terms to the laws of the United States of America and
the Commonwealth of Pennsylvania and the States of Ohio, Arkansas and Texas
and may be given subject to applicable bankruptcy, insolvency,
reorganization, moratorium and other similar laws affecting the
enforceability of creditors' rights generally and be limited to the extent
that enforcement may be affected by the availability of equitable remedies
or the applicability of principles of equity.
(e) Approvals and Consents. Sellers and Shareholder shall have
obtained all requisite approvals and consents from governmental or
regulatory bodies or agencies, whether Federal, state or local. Consents
to assignment of the Assigned Agreements shall have been obtained by
Shareholder and/or Sellers if and to the extent required by the terms of
such Assigned Agreement. Sellers shall obtain a certificate from the
landlord with respect to each Lease to the effect (i) that such Lease has
not been amended, modified or supplemented and is in full force and effect
on the Closing Date, (ii) the date to which payments under such Lease have
been made, (iii) that there is no default or event which, with notice or
the passing of time, would constitute a default under such Lease and (iv)
that there are no setoffs, defenses or counterclaims against enforcement of
the obligations to be performed under such Lease in favor of the party
executing such consent.
(f) Litigation. As of the Closing Date, there shall not be in
effect any judgment, order, injunction or decree of any court of competent
jurisdiction, the effect of which is to prohibit or restrain the
consummation of the transactions contemplated by this Agreement.
(g) No Material Adverse Change. Since February 1, 1997 there
shall not have been any material adverse change in the business, assets or
financial condition of the Business.
(h) No Change in Law. There shall not have been any action, or
any statute enacted, by any government or agency thereof which would render
the parties unable to consummate the transactions contemplated herein or
make the transactions contemplated herein illegal, prohibit or restrict the
consummation of the transactions contemplated herein. In the case of
failure of the condition set forth in this Section 6.01(h), Buyer shall
deliver to Sellers and Shareholder an opinion of counsel to such effect.
(i) Telephone and Fax Numbers. Sellers shall have delivered to
Buyer a letter from Sellers addressed to Sellers' telephone companies
instructing such companies to transfer Sellers' telephone and fax numbers
relating to the Business at the Acquired Sites to Buyer.
(j) Escrow Agreement; Transition Services Agreement. On the
Closing Date, Sellers shall have duly executed and delivered to Buyer the
Escrow Agreement and Sellers and Shareholder shall have duly executed and
delivered to Buyer the Transition Services Agreement.
(k) Liens and Encumbrances. All Encumbrances on the Purchased
Assets shall have been released and executed instruments of release and
termination statements satisfactory to Buyer shall have been delivered to
Buyer.
(l) HSR Act. Any applicable waiting period under HSR Act shall
have expired or been terminated.
(m) Closing Date Physical Count. The Closing Date Physical
Count shall be made in accordance with GAAP.
(n) Satisfactory Phase I. The Phase I environmental review
undertaken on behalf of the Buyer shall be satisfactory to Buyer with
respect to the Acquired Sites and shall be completed as soon as reasonably
practicable following the date hereof.
(o) Delivery of Revised and Updated Exhibits. Not more than ten
(10) business days nor less than five (5) business days prior to the
Closing Date, XLSource shall deliver to Buyer copies of the revised
Exhibits required by Section 8.01(k), which revised Exhibits shall not
reflect any changes which identify a breach by Shareholder or any Seller of
any covenant contained in this Agreement, which are not consistent with the
past practices of the Business. Any Sellers Updated Exhibits delivered
pursuant to Section 5.01(w) shall be reasonably satisfactory to Buyer.
(p) Revenues of Business. The gross revenues of the Business
for the three fiscal month period ended on the last day of the fiscal month
immediately preceding the Closing Date shall be not less than $115,000,000.
(q) Provision of Product and Services. XLConnect shall have
entered into an agreement with Buyer or another GECITS Entity with respect
to the provision of product and services in the geographic areas in which
the Acquired Sites and the Other Sites are located.
(r) XLConnect Oracle Service Agreement. XLConnect shall have
entered into a service agreement with Buyer or another GECITS Entity,
reasonably satisfactory to Buyer or such GECITS Entity, for a term of up to
six months with up to two three-month extensions, to provide management
services with respect to the Oracle software referred to in item 5 of
Exhibit 5.01(d)(1)(D) on a cost plus margin basis. All payments under such
service agreement shall be prepaid on the Closing Date in an amount to be
agreed by Buyer and XLConnect.
Section VI.02 Conditions to Obligations Of Sellers and
Shareholder. The obligations of Sellers and Shareholder to consummate the
transactions contemplated by this Agreement shall be subject to the
fulfillment, or the waiver by Sellers and Shareholder, on or prior to the
Closing Date, of the following conditions:
(a) Representations and Warranties True at the Closing Date.
The representations and warranties of Buyer contained in this Agreement
shall be deemed to have been made again at and as of the Closing Date and
shall then be true and correct.
(b) Compliance with Covenants. All the terms, covenants,
agreements and conditions of this Agreement to be complied with and
performed by Buyer on or prior to the Closing Date shall have been duly
complied with and performed in all material respects.
(c) Delivery of Closing Documents. Buyer shall have delivered
to Shareholder and Sellers on or prior to the Closing Date all the
documents required to be delivered pursuant to Section 7.02.
(d) Opinion of Buyer's Counsel. Sellers and Shareholder shall
have received an opinion or opinions of Dewey Ballantine, counsel for Buyer
dated the Closing Date and addressed to Seller and Shareholder, to the
effect that:
(i) Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware;
(ii) Buyer has full corporate power and authority to
enter into this Agreement, the Escrow Agreement, the Transition Services
Agreement and the Assignment Agreement and to consummate the transactions
contemplated hereby, and all corporate and other proceedings required to be
taken by or on the part of Buyer to authorize it to enter into this
Agreement, the Escrow Agreement, the Transition Services Agreement and the
Assignment Agreement and to consummate the transactions contemplated hereby
have been duly and properly taken;
(iii) Each of this Agreement, the Escrow Agreement, the
Transition Services Agreement and the Assignment Agreement has been duly
executed and delivered by Buyer and each such agreement constitutes a
legal, valid and binding obligation of Buyer, enforceable in accordance
with its terms;
(iv) The execution, delivery and performance by Buyer of
the instruments and agreements referred to in paragraphs (iii) above, (A)
will not conflict with or violate any provision of any applicable law, rule
or regulation or any order, writ, injunction or decree known to such
counsel, (B) will not conflict with any provision of the Certificate of
Incorporation or By-laws of Buyer and, to the actual knowledge of such
counsel, will not conflict with or result in a breach of any term or
provision of, or constitute a default under, any indenture, mortgage,
lease, agreement or other instrument to which Buyer is a party or by which
it is bound, and (C) do not require the consent or approval of, or
registration, declaration or filing with, any court, administrative agency
or commission or other governmental authority or instrumentality; and
(v) To the knowledge of such counsel, there is no
action, suit or proceeding pending or threatened in any Federal, state,
municipal or other court, agency or other governmental body seeking to
restrain or prohibit the consummation of the transactions contemplated
hereby, except as described in such opinion.
Such opinion may be limited to the laws of the State of New York and the
General Corporation Law of the State of Delaware and such opinion may be
given subject to applicable bankruptcy, insolvency, reorganization,
moratorium and other similar laws affecting the enforceability of
creditors' rights generally and be limited to the extent that enforcement
may be affected by the availability of equitable remedies or the
applicability of principles of equity.
(e) Consideration. The Direct Payment shall have been paid to
Seller and the Escrow Deposit shall have been paid to the Escrow Agent, in
each case, in accordance with Section 3.01 and Buyer shall have executed
and delivered to Seller the Assignment Agreement.
(f) No Change in Law. There shall not have been any action, or
any statute enacted, by any government or agency thereof which would render
the parties unable to consummate the transactions contemplated herein or
make the transactions contemplated herein illegal, prohibit or restrict the
consummation of the transactions contemplated herein. In the case of
failure of the condition set forth in this Section 6.02(f), Seller and
Shareholder shall deliver to Buyer an opinion of counsel to such effect.
(g) Litigation. As of the Closing Date, there shall not be in
effect any judgment, order, injunction or decree of any court of competent
jurisdiction, the effect of which is to prohibit or restrain the
transactions contemplated by this Agreement.
(h) HSR Act. Any applicable waiting period under the HSR Act
shall have expired or been terminated.
(i) Approvals and Consents. Sellers and Shareholder shall have
obtained all requisite approvals and consents from governmental or
regulatory bodies or agencies, whether Federal, state or local. Sellers
and Shareholder shall have obtained all requisite consents from each entity
providing financing for the Business, the consent of which is necessary to
deliver the Purchased Assets to Buyer free and clear of all Encumbrances.
(j) Escrow Agreement; Transition Services Agreement. On the
Closing Date, Buyer shall have duly executed and delivered to Sellers the
Escrow Agreement and Buyer shall have duly executed and delivered to
Sellers and Shareholder the Transition Services Agreement.
(k) Provision of Product and Services. XLConnect shall have
entered into an agreement with Buyer or another GECITS Entity with respect
to the provision of product and services in the geographic areas in which
the Acquired Sites and the Other Sites are located.
(l) Consent of Shareholder's Shareholders. If the RND Closing
Date shall have occurred prior to the Closing Date, Shareholder shall have
obtained all requisite approvals of its shareholders to the transactions
contemplated by this Agreement.
(m) XLC Common Customers. Buyer's list of XLC Common Customers
shall be reasonably satisfactory to XLSource.
ARTICLE VII
-----------
Documents to be Delivered on Closing Date
-----------------------------------------
Section VII.01 Documents to be Delivered by Shareholder and
Sellers on Closing Date. On the Closing Date, Shareholder and Sellers
shall deliver to Buyer, in form and substance satisfactory to Buyer and its
counsel:
(a) Conditions Precedent. The documents, agreements and
instruments referred to in Section 6.01 as conditions precedent to the
obligations of Buyer.
(b) Officer's Certificates. Certificates signed by the
President or Vice President of Shareholder and the President of each Seller
with respect to the matters referred to in Section 6.01(a) and (b).
(c) Bills of Sale. Bills of sale duly executed by the Sellers
conveying the Purchased Assets at the Closing Date.
(d) Assignment Agreement, Escrow Agreement and Transition
Services Agreement. The Assignment Agreement and the Transition Services
Agreement duly executed by Sellers and Shareholder and the Escrow Agreement
duly executed by Sellers and Escrow Agent.
(e) Resolutions of the Sellers and the Shareholder. A true
and complete copy, certified by the Secretary or an Assistant Secretary of
each of the Sellers and the Shareholder, of the resolutions duly and
validly adopted by the Board of Directors of each Seller and the
Shareholder evidencing its authorization of the execution and delivery of
this Agreement and the other agreements to be executed by the Sellers and
the Shareholder, as applicable, as contemplated hereby and the consummation
of the transactions contemplated hereby.
(f) Incumbency Certificate of the Sellers and the
Shareholder. A certificate of the Secretary or an Assistant Secretary of
each Seller and the Shareholder certifying the names and signatures of the
officers of each Seller and the Shareholder, as applicable, authorized to
sign this Agreement and the other documents to be delivered hereunder.
(g) Organizational Documents. A copy of (i) the Articles of
Incorporation, as amended (or similar organizational documents), of each
Seller and the Shareholder certified by the Secretary or Department of
State of the state or commonwealth of incorporation of such Seller and the
Shareholder, respectively, as of a date not earlier than three (3) business
days prior to the Closing Date and accompanied by a certificate of the
Secretary or Assistant Secretary of each Seller and the Shareholder, dated
as of the Closing Date, stating that no amendments have been made to such
Articles of Incorporation since such date and (ii) the By-laws of each
Seller and the Shareholder, certified by the Secretary or Assistant
Secretary of each such entity.
(h) Good Standing; Qualification to Do Business. The Buyer
shall have received a good standing certificate from the Secretary or
Department of State of (i) each jurisdiction in which any Sellers or the
Shareholder is incorporated or organized, and (ii) each other jurisdiction
in which the Sellers or Shareholder is conducting the Business requiring it
to qualify in such jurisdiction, in each case dated as of a date not
earlier than three (3) Business Days prior to the Closing Date and
accompanied by bring-down telegrams or facsimiles (to the extent available
in the relevant jurisdictions) dated the Closing Date.
(i) Further Instruments. Such further instruments of
assignment, conveyance or transfer or other instruments covering the
Purchased Assets or any part thereof, and such further instruments with
respect to the transactions contemplated hereby, as Buyer may reasonably
request.
Section VII.02 Documents to be Delivered by Buyer on Closing
Date. On the Closing Date, Buyer shall deliver to Sellers and Shareholder
in form and substance satisfactory to Shareholder and Sellers and their
counsel:
(a) Conditions Precedent. The payments, documents, agreements
and instruments referred to in Section 6.02 as conditions precedent to the
obligations of Shareholder and Sellers.
(b) Officer's Certificate. A certificate signed by the
President or a Vice President of Buyer with respect to the matters referred
to in Section 6.02(a) and (b).
(c) Other Documents. The Assignment Agreement, the Transition
Services Agreement and the Escrow Agreement, each duly executed by Buyer.
(d) Further Instruments. Such further instruments with respect
to the transactions contemplated hereby, including instruments of
assumption, as Sellers may reasonably request.
ARTICLE VIII
------------
Further Covenants and Agreements
of Sellers, Shareholder and Buyer
---------------------------------
Section VIII.01 Further Covenants and Agreements of Shareholder
and Sellers. Shareholder and Sellers agree that:
(a) Conduct of Business Pending Closing. From the date of this
Agreement to the Closing Date, Shareholder and Sellers:
(i) will maintain the Purchased Assets and not remove
any Purchased Assets from the Acquired Sites or the Other Sites except in
the ordinary course of business;
(ii) will perform their obligations under the Assigned
Agreements;
(iii) will conduct the Business only in the ordinary
course;
(iv) will not (A) fail to comply in any material respect
with any laws, ordinances, regulations or other governmental restrictions
applicable in any respect to the Business or any of the Purchased Assets,
(B) grant any powers of attorney to act for the Business after the Closing
Date, (C) mortgage or pledge or otherwise encumber any of the Purchased
Assets except in the ordinary course of business consistent with past
practices and pursuant to agreements in existence on the date hereof,
copies of which have been provided to Buyer, (D) cancel or terminate any
contract, agreement or other instrument material to the Business, other
than contracts, agreements and other instruments which are not to be
assigned to Buyer unless Shareholder or Sellers is otherwise obligated to
maintain them in effect or are necessary for the conduct of the Business,
(E) engage in or enter into any material transaction with respect to the
Business of any nature not expressly provided for herein, (F) pay any
dividend or make any other distribution or payment to the Shareholder or
Sellers, (G) amend, modify or supplement any Employment Contract listed on
Exhibit 5.01(q)(1) (H) issue any additional shares of capital stock of the
Sellers or any options, rights or warrants exchangeable for or convertible
into any shares of capital stock of the Sellers or (I) establish, create or
participate in any new Sellers Benefit Plan or any new Employee Pension
Benefit Plan (or amend or modify any existing Sellers Benefit Plan or
Employee Pension Benefit Plan, except for immaterial amendments or
modifications to any Sellers Benefit Plan or Employee Pension Benefit Plan
which covers employees of Shareholder or its Subsidiaries other than
Sellers Employees) which, if entered into, created or established prior to
the date of this Agreement, would be required to be listed (or, in the case
of modifications and amendments, pertains to a Sellers Benefit Plan or
Employee Pension Plan which is presently listed) on an Exhibit to this
Agreement;
(v) (A) take such action as may reasonably be necessary
to preserve the Purchased Assets, (B) maintain inventory of the kinds and
in the quantities maintained in the ordinary course of the Business, (C)
maintain its books and records in a manner consistent with past practices
and promptly advise Buyer in writing of any material adverse change in the
condition (financial or otherwise) of the Purchased Assets or the Business
of Seller and (D) use its reasonable commercial efforts to preserve the
organization of the Business intact and continue its operations at its
present levels, to keep available to Buyer the services of Company
Personnel and to preserve the goodwill of the suppliers, customers,
creditors and others having business relations with Sellers or Shareholder
in connection with the Business; and
(vi) without the prior written consent of Buyer, permit
any Sellers Employees as of May 3, 1997 to be hired by XLConnect.
(b) Access to the Business. (i) Sellers and Shareholder shall,
from the date hereof up to and including the Closing Date, permit Buyer and
Buyer's attorneys, accountants, agents and representatives full access to
the books, records, business and assets of Sellers and Shareholder with
respect to the Business at any reasonable time and in any reasonable manner
on reasonable advance notice and in a manner that does not interrupt
Seller's business. Buyer shall have the right to meet with customers and
suppliers of Shareholder and Sellers with respect to the Business and
Sellers and Shareholder will give Buyer full cooperation with respect
thereto. Buyer will cooperate and consult with Seller and Shareholder in
arranging any meetings with such customers and suppliers.
(c) Corporate Name. From and after the Closing, Sellers shall
possess to the extent permitted by law, to the exclusion of Buyer, all
rights to the name XLSource and any variants or derivatives of the
foregoing name, and Buyer shall not have any rights whatsoever to the use
of such name or any formatives, variants or derivatives of such name;
provided, however, that Buyer may use such name during a transition period
of 45 days following the Closing Date.
(d) Changes in Representations and Warranties. Between the date
of this Agreement and the Closing Date, Shareholder shall not and neither
Sellers nor Shareholder shall permit Sellers to, enter into any
transaction, take any action, or by inaction, permit an event to occur,
which would result in any of the representations and warranties of Sellers
or Shareholder herein contained not being true and correct at and as of
(i) the time immediately following the occurrence of such transaction or
event or (ii) the Closing Date. Sellers and Shareholder shall promptly
give written notice to Buyer upon becoming aware of (A) any fact which, if
known on the date hereof, would have been required to be set forth or
disclosed pursuant to this Agreement, and (B) any impending or threatened
breach in any material respect of any of the representations and warranties
contained in this Agreement and with respect to the latter shall use all
reasonable efforts to remedy same.
(e) Further Assurances. Sellers and Shareholder will cooperate
fully with Buyer in connection with the transactions contemplated by this
Agreement. Without limiting the generality of the foregoing, from and
after the Closing Date, from time to time, at Buyer's request and without
further consideration, Sellers and Shareholder will execute and deliver
such other instruments, including powers of attorney, and take such other
action as Buyer may reasonably request to more effectively put Buyer in
possession and operating control of all or any part of the Purchased Assets
or Acquired Sites.
(f) No Mergers, Consolidations, Sales of Assets, Etc. of any
Seller. Until the earlier of the consummation of the transactions
contemplated by the Agreement or the termination date provided for in
Section 9.02 below, neither any Seller nor Shareholder will, directly or
indirectly, solicit any inquiries or proposals or enter into or continue
any discussions, negotiations or agreements relating to the sale or
exchange of the capital stock of any Seller, the merger of any Seller with,
or the direct or indirect acquisition or disposition of all or any part of
the Purchased Assets otherwise than in the ordinary course of the business
of a Seller or Shareholder to or from, any person other than Buyer or its
Affiliates or provide any assistance or any information to or otherwise
cooperate with any person in connection with any such inquiry, proposal or
transaction.
(g) Minimum Net Worth of Shareholder. From the Closing Date to
and including the date of repurchase of uncollected Receivables pursuant to
Section 8.10, Shareholder will maintain a Net Worth not less than
$80,000,000 and will not make any distributions, dividends or other
payments to the holders of its common shares and thereafter so long as
Shareholder shall have any obligations under this Agreement, Shareholder
will maintain a Net Worth equal to or greater than $50,000,000 (the
"Minimum Net Worth") on a consolidated basis and will not sell, lease,
transfer or otherwise dispose of all or substantially all of its assets or
consolidate with or merge with or into any Person or permit any Person to
merge with or into it, except that the Shareholder may sell all or
substantially all of its assets to, or consolidate with or merge with or
into, any other corporation, or permit another corporation to merge with or
into it; provided that:
(i) such successor or purchasing corporation (if such
corporation shall not be the Shareholder) shall be a corporation
incorporated within Canada or the United States of America;
(ii) the obligations of the Shareholder under this
Agreement (including, without limitation, the obligation to maintain a
Minimum Net Worth as provided in this Section 8.01(g)) shall be expressly
and effectively assumed by such successor or purchasing corporation (if
such corporation shall not be the Shareholder); and
(iii) after giving effect to such sale, consolidation or
merger, the Net Worth of such successor or purchasing corporation shall be
equal to or greater than the Minimum Net Worth.
(h) Financial Statements. Sellers shall deliver to Buyer,
promptly upon their becoming available but not later than thirty (30) days
following the end of each applicable month, copies of monthly statements of
assets and liabilities and revenues and expenses for the Business for each
of the months and quarters ending after May 3, 1997 and prior to the
Closing, which statements will be prepared in accordance with GAAP applied
on a consistent basis and will present fairly the financial position of the
Business and the results of operations of the Business as of its date
except as described in Exhibit 3.01(a)(1).
(i) Taxes. Sellers and Shareholder shall take all actions and
shall file all estimates or reports related to the state Tax requirements
of the State in which any Acquired Site or Other Site is located to ensure
that Buyer (i) shall not be liable under the laws of such State for the
payment of any Taxes as a result of the consummation of the transactions
contemplated by this Agreement and (ii) to the extent possible, will not be
required to withhold any portion of the Purchase Price.
(j) Telephone and Facsimile Numbers. Shareholder and Seller
shall have delivered to Buyer letters from Shareholder and Seller addressed
to Seller's telephone companies instructing such companies to transfer to
Buyer the telephone and fax numbers of Seller and Shareholder relating to
the Business at the Acquired Sites. Shareholder and Seller will direct all
calls made to the Other Sites and relating to the Business to Buyer at the
telephone numbers provided by Buyer for such purpose.
(k) Revised Exhibits Listing Assigned Agreements, Inventory,
Receivables and Fixed Assets; Employees. On or prior to the Closing Date
Sellers and Shareholder shall amend each of Exhibit 5.01(d)(1)(A), Exhibit
5.01(d)(1)(B), Exhibit 5.01(d)(1)(C), Exhibit 5.01(d)(1)(E), Exhibit
5.01(d)(1)(F), Exhibit 5.01(d)(1)(G) and Exhibit 5.01(d)(3) by delivering
to Buyer a revised copy of such Exhibit as of a date not more than ten (10)
business days nor less than five (5) business days prior to the Closing
Date, together with a copy of each Assigned Agreement included on such
amended Exhibit that is not listed on Exhibit 5.01(d)(1)(A) attached
hereto. Each such amended Exhibit shall be reasonably satisfactory to
Buyer. Following delivery of such amended Exhibits, such amended Exhibits
shall replace for all purposes of this Agreement the like numbered Exhibit
attached hereto. On and as of the date ten (10) days prior to the Closing
Date, Sellers and Shareholder shall deliver to Buyer a list of the changes
in the Sellers Employees since May 3, 1997.
(l) Certain Rights Under Indemnity Agreement. From and after
the Closing Date, Shareholder and XLConnect shall treat Buyer and its
successors and assigns with respect to the Business as IE Companies within
the meaning of and for all purposes under the Indemnification Agreement
dated October 22, 1996 by and between Shareholder and XLConnect and Buyer
and its successors and assigns shall be entitled to all rights and benefits
provided by such Indemnification Agreement.
(m) Sale of Fixed Assets at Other Sites. Shareholder and
Sellers hereby agree to sell to Buyer on the Closing Date all or such
portion of the Fixed Assets located at the Other Sites as Buyer, in its
sole discretion, determines to purchase. The purchase price for such Fixed
Assets shall be the net book value thereof as set forth on Shareholder's or
Sellers' books and records and shall be paid by Buyer on the Closing Date.
Section VIII.02 Consents to Assignments; Permits. Anything in
this Agreement or the bills of sale notwithstanding, to the extent that any
Assigned Agreement to be sold, assigned, transferred or conveyed to Buyer,
or any claim, right or benefit arising thereunder or resulting therefrom
(the "Interests"), is not capable of being sold, assigned, transferred or
conveyed without the approval, consent or waiver of the other party
thereto, or any third person (including a government or governmental unit),
or if such sale, assignment, transfer or conveyance or attempted
assignment, transfer or conveyance would constitute a breach thereof or a
violation of any law, decree, order, regulation or other governmental
edict, except as expressly otherwise provided herein, this Agreement shall
not constitute a sale, assignment, transfer or conveyance thereof, or an
attempted assignment, transfer or conveyance thereof. After the Closing,
until any Interest has been validly and effectively assigned to Buyer, (i)
prior to the date two years following the Closing Date, Shareholder and
Sellers, as the case may be, shall hold such Interest for the benefit of
Buyer and Buyer shall be entitled to receive all benefits under such
Interest and shall be responsible for the obligations under such Interest
to the extent relating to the benefits received, and (ii) any such Interest
shall, notwithstanding the failure to receive any approval, consent or
waiver (but so long as the same shall not constitute a violation of law),
be deemed to be assigned, transferred or conveyed to Buyer if (x) written
notice of such assignment, transfer or conveyance is given to the other
party to such Interest on or before the Closing Date and (y) the other
party to such Interest does not, within three months after the Closing,
object to such assignment, transfer or conveyance or acts in a manner
inconsistent with such assignment, transfer or conveyance.
Section VIII.03 Survival of Representations, Warranties, Etc.
(a) All covenants and agreements of the parties made in this Agreement or
provided herein shall survive the Closing Date without limit, unless
otherwise specifically provided herein. All representations and warranties
of the parties made in this Agreement or as provided herein shall survive
the Closing Date and for a period ending on May 3, 1999, notwithstanding
any investigation at any time made by or on behalf of the other party;
provided, however, that the representations and warranties relating to any
Tax and any environmental matter shall survive until six months after the
applicable statute of limitations (or any extension thereof) has expired
(as the case may be, the applicable "Survival Period"); and provided,
further, that, any representation or warranty which is the subject of a
claim or dispute asserted prior to the expiration of the Survival Period
shall survive with respect to such claim or dispute until final resolution
thereof. All claims for indemnity hereunder shall be made in writing, and
shall state with reasonable specificity the matter for which
indemnification is sought.
(b) Shareholder's and Sellers' Agreement to Indemnify.
Shareholder and Sellers, jointly and severally, hereby agree to indemnify
and hold Buyer and its shareholders and their officers and directors
harmless from and against any and all claims, liabilities, losses, damages
or injuries, together with costs and expenses, including reasonable legal
fees, arising out of or resulting from (i) any incorrectness or
incompleteness in the representations and warranties made by Shareholder,
XLConnect or Sellers in this Agreement, (ii) any breach in any material
respect by Shareholder or Sellers, unless waived, of any covenant or
agreement of Shareholder or Sellers contained in or arising out of this
Agreement, (iii) the Business conducted by Sellers, or otherwise in
connection with the Purchased Assets or the Assumed Liabilities, prior to
the Closing Date other than obligations in respect of Assumed Liabilities
which are due, in accordance with their terms, after the Closing Date or
included on the Closing Date Balance Sheet, (iv) any failure by Buyer,
Shareholder or Sellers to comply with the bulk sales laws of any
jurisdiction except to the extent the claim is predicated on payment of an
Assumed Liability after the Closing Date and the failure of Buyer to pay
such Assumed Liability, (v) any and all actions, suits, proceedings,
claims, demands, assessments and judgments incidental to the foregoing or
the enforcement of such indemnification and (vi) all Environmental
Liabilities and Costs.
In addition to the foregoing provisions of this Section 8.03(b)
and without limiting the generality of such provisions, Seller and
Shareholder, jointly and severally, agree to fully indemnify and hold
harmless Buyer and its affiliates and stockholders, officers and directors
of any of the foregoing against and in respect of and, on demand, will
reimburse Buyer and its affiliates for: (a) any and all liability
whatsoever, and however imposed (including any claim asserted against or
deficiency assessed against or collected from or paid by Buyer or any
affiliates thereof), in respect of any Taxes of Sellers (or any
predecessors of Sellers) and Shareholder for any and all periods through
the period ending on the Closing Date, without regard to whether or not the
existence of such liability would constitute a breach of a representation
or warranty made by Sellers or Shareholder hereunder and (b) any and all
liabilities of Sellers existing on, or arising under or relating to
activities or transactions of Sellers other than the Assumed Liabilities.
(c) Buyer's Agreement to Indemnify. Buyer hereby agrees to
indemnify and hold Shareholder, Sellers and Sellers' and Shareholder's
officers and directors harmless from and against any and all claims, lia-
bilities, losses, damages or injuries, together with costs and expenses,
including reasonable legal fees, arising out of or resulting from (i) any
incorrectness or incompleteness in the representations and warranties made
by Buyer in this Agreement, (ii) any breach in any material respect by
Buyer, unless waived, of any covenant or agreement of Buyer contained in or
arising out of this Agreement (iii) the business conducted by Buyer at the
Acquired Sites, or otherwise in connection with the Purchased Assets on or
after the Closing Date and (iv) the Assumed Liabilities other than
obligations in respect of Assumed Liabilities which are due, in accordance
with their terms, on or before the Closing Date and are not included on the
Closing Date Balance Sheet.
(d) Claims. Each party shall retain its own counsel and defend
itself, subject to being reimbursed by the indemnifying party for
reasonable attorneys' fees and expenses pursuant to this Section 8.03. The
indemnified party agrees to promptly give the indemnifying party written
notice of any claim, demand, action, suit, proceeding or discovery of fact
upon which the indemnified party intends to base a claim for
indemnification ("Claim") under this Section 8.03. The indemnifying party
shall have the right to participate jointly with the indemnified party in
the indemnified party's defense of any Claim. If the indemnifying party
shall take over the responsibility for the defense of any Claim, the
indemnifying party's obligation to reimburse the indemnified party's
reasonable attorney's fees and expenses shall cease so long as the
indemnifying party is not in default in its obligations under this Section
8.03(d) with respect to such Claim. With respect to any issue involved in
any such Claim, as to which the indemnifying party shall have acknowledged
in writing the obligation to indemnify the indemnified party hereunder, the
indemnifying party shall have the sole right to defend, settle or otherwise
dispose of such Claim, on such terms as the indemnifying party, in its sole
discretion, shall deem appropriate; provided that such terms do not result
in any expense to the indemnified party. In addition, the parties agree to
cooperate in any defense or settlement and to give each other full access
to all information relevant thereto.
(e) Remedies. Any claim by Buyer hereunder may be satisfied
from amounts held pursuant to the Escrow Agreement. Nothing herein shall
preclude the assertion by Buyer, Sellers or Shareholder, as applicable, of
any rights or remedies available to them at law or equity (including, but
not limited to, any right of set-off) in respect of the foregoing
agreements of indemnity. Sellers and Shareholder acknowledge that
irreparable damage would result if the provisions of Sections 8.01(b), (d)
and (h) were not complied with in accordance with their respective specific
terms. Accordingly, Sellers and Shareholder agree that Buyer shall have
the right, in addition to any other rights or remedies it may have, to
injunctive relief, in respect of any failure on the part of Sellers or
Shareholder to comply with provisions of Sections 8.01(b), (d) or (h).
(f) Limitation on Indemnity Obligations. The respective
obligations of Sellers and Shareholder under Section 8.03(b) and of Buyer
under Section 8.03(c) each shall be limited to an aggregate amount equal to
the Purchase Price. Neither Sellers nor Shareholder nor Buyer shall make
any Claim unless the aggregate amount of Claims by such party exceeds
$100,000; provided, however, that any party making Claims hereunder for an
amount in excess of $100,000 shall be entitled to indemnification with
respect to the entire amount of its Claims.
Section VIII.04 Allocations of Purchase Price. After the
Closing, Buyer shall provide to Shareholder copies of Internal Revenue
Service Form 8594 and any required exhibits thereto with Buyer's proposed
allocation of the purchase price among the Purchased Assets. Such
allocation shall be based on the fair market value of each Purchased Asset
at Closing and otherwise in a manner consistent with Section 1060 of the
Code and the regulations thereunder. Within 30 days after the receipt of
such Form 8594, Shareholder shall propose to Buyer any changes to such Form
8594 or shall indicate its concurrence therewith. The failure by
Shareholder to propose any changes within such 30 days shall be deemed to
be an indication of Shareholder's concurrence with such form as proposed by
Buyer. Buyer and Shareholder shall endeavor in good faith to resolve any
differences with respect to the items on Form 8594. Notwithstanding the
foregoing, if Buyer and Shareholder are unable to resolve such differences,
then such differences shall be resolved in accordance with Section 8.05.
Each of Sellers, Buyer and Shareholder hereby covenants and agrees that it
will not take, and will cause each of its subsidiaries not to take, a
position on any foreign, Federal, state or local tax return that is in any
way inconsistent with the allocation made pursuant to this Section 8.04,
unless advised by counsel that its failure to take such inconsistent
position would result in it violating applicable law or incurring
penalties.
Section VIII.05 Resolution of Disputes. Buyer and Shareholder
shall promptly seek to resolve any dispute arising under Section 8.04 of
this Agreement. If Buyer and Shareholder are unable to resolve any such
dispute, Buyer and Shareholder will select an accounting firm (if the
dispute relates to accounting issues) and/or an independent appraisal firm
(if the dispute is one of valuation) mutually acceptable to them to resolve
any remaining disputes. If Buyer and Shareholder are unable to agree on
the choice of an accounting firm and/or an appraisal firm, they will select
a nationally recognized accounting firm or appraisal firm by lot (after
excluding their respective regular outside accounting firms and/or
appraisal firms). Buyer and Shareholder will share equally the fees and
expenses of the accounting firm and/or appraisal firm designated to resolve
outstanding disputes. Buyer, Sellers and Shareholder shall be bound by the
determinations of such accounting firm and/or appraisal firm.
Section VIII.06 Inspection of Records. Sellers and Shareholder
agree, prior to the Closing Date and for the two year period following the
Closing Date, to allow representatives of the Buyer reasonable opportunity
from time to time during normal business hours to inspect and make copies
of the books of account and other records of Sellers which pertain to the
Business and which are not transferred to Buyer hereunder. Sellers and
Shareholder further agree, prior to the Closing Date and for the two year
period following the Closing Date, to cooperate with Buyer's accountants,
counsel and other agents and representatives, and to provide access to the
Seller's records with respect to the Business and to use reasonable
commercial efforts to provide access to the records of the Seller's
independent auditors with respect to the Business (including, without
limitation, all financial and accounting books, workpapers and any
consolidating and other worksheets of its independent auditors) and to
promote the cooperation by its personnel, counsel and independent auditors,
for the purpose of preparing audited financial statements of Sellers for
the annual periods ending February 1, 1997 and each of the two preceding
fiscal years. Buyer shall be solely responsible for the costs and expenses
associated therewith.
Section VIII.07 Non-Competition; Non-Solicitation. (a) Seller
and Shareholder. (i) From and after the Closing Date to and including one
year following the Closing Date, neither Sellers nor Shareholder or any
Affiliate thereof (including, without limitation, XLConnect), will sell,
directly or indirectly, any computer product to any XLS Transferred
Customer unless such customer is a Common XLS Transferred Customer;
provided, however, that Sellers, Shareholder and any such Affiliate will
only sell computer product to a Common XLS Transferred Customer at the
locations (which shall not include the geographic areas in which any
Acquired Site or Other Site is located), in the categories and to the
extent (which shall not limit purchase volumes or aggregate revenues) being
provided (or the subject of a successful bid to provide which was
outstanding on the Closing Date) by Sellers as of the Closing Date to such
Common XLS Transferred Customer. During such one year period XLConnect
either (x) will purchase all computer product required by XLConnect for any
XLS Transferred Customer unless such customer is a Common XLS Transferred
Customer and such purchase is for the location, in the category and to the
extent being provided by Sellers as of the Closing Date to such Common XLS
Transferred Customer, from or (y) will refer all such customers that
require computer product for an application to, Buyer or another GECITS
Entity. During such one year period, neither Sellers nor Shareholder nor
any Affiliate thereof (including, without limitation, XLConnect) shall
provide Computer Services (A) to any customer listed on Exhibit 8.07(a),
(B) to any customer that is a party to the Power by the Hour Agreements
other than (i) Borden Chemical, Inc. and (ii) network integration and
applications services and (C) in connection with the agreement listed in
item 19A of Exhibit 5.01(d)(1)(A); provided, however, that they shall not
provide power by the hour services to Borden Chemical Inc. Sellers,
Shareholder and XLConnect understand that in connection with the
negotiations leading up to the entering into of this Agreement, each has
received, and that pursuant to this Agreement, each will receive,
confidential and proprietary information of Buyer and its Affiliates,
including, without limitation, customer lists and other trade secrets.
(ii) From and after the date hereof to and including the date
one year following the Closing Date, neither Sellers, Shareholder or any
Affiliate thereof (including, without limitation, XLConnect) will, unless
acting with the express written consent of Buyer, directly or indirectly,
employ or offer employment to any (x) person who was employed by
Shareholder or, any Seller in connection with the Business, Buyer or
Buyer's Affiliates or (y) any person who otherwise performed services on a
regular basis for Shareholder or any Seller in connection with the
Business, Buyer or Buyer's Affiliates, in the case of (x) or (y) during the
12 months immediately preceding the date of this Agreement; provided,
however, that after the Closing Date Sellers or Shareholder (a) may hire
any Sellers Employee that is not a Transferred Employee and (b) may
continue to employ any person employed by Shareholder, any Seller or any
Affiliate thereof (including, without limitation, XLConnect) at the Closing
Date who is not employed in connection with the Business.
(b) Buyer. (i) From and after the Closing Date to and
including the date one year following the Closing Date, neither Buyer nor
the GECITS Entities will provide, directly or indirectly, Computer Services
to any XLS Transferred/XLC Customer other than to customers that are
parties to the Power by the Hour Agreements or listed on Exhibit 8.07(a)
unless such customer is an XLC Common Customer; provided, however, that
Buyer and the GECITS Entities will only provide Computer Services to an XLC
Common Customer at the locations, in the categories and to the extent
(which shall not limit purchase volumes or aggregate revenues) being
provided (or the subject of a successful bid to provide which was
outstanding on the Closing Date) by Buyer or a GECITS Entity as of the
Closing Date or acquired by Buyer or a GECITS Entity after the Closing Date
and to XLC Common Customers in locations where Shareholder, Sellers or
XLConnect do not provide Computer Services immediately following the
Closing Date. During such one year period, Buyer shall and shall cause the
GECITS Entities to refer all XLS Transferred/XLC Customers that request
Computer Services to XLConnect unless Buyer or the GECITS Entities are
permitted to provide Computer Services to such customers in accordance with
this Section 8.07(b)(i). Buyer understands that in connection with the
negotiations leading up to the entering into of this Agreement, it has
received, and that pursuant to this Agreement, will receive, confidential
and proprietary information of Shareholder, Sellers and XLConnect,
including, without limitation, customer lists and other trade secrets.
(ii) From and after the date hereof to and including the date
one year following the Closing Date, Buyer will not and will cause the
GECITS Entities not to, unless acting with the express written consent of
Shareholder, directly or indirectly, (A) employ or offer employment to any
person who was employed by Shareholder, any Seller or XLConnect at any time
between the date hereof and the Closing Date unless such person is a
Transferred Employee, a Sellers Employee or any person who otherwise
performed services on a regular basis for the Business or in connection
with the Transition Services Agreement or (B) solicit to accept employment
with Buyer or any GECITS Entity any other employee of any Seller,
Shareholder or XLConnect after the Closing Date.
(c) (i) Each party acknowledges that the restrictions contained
in this Section 8.07 hereof are reasonable and necessary to protect the
legitimate interests of each party to this Agreement and that each party
would not have entered into this Agreement in the absence of such
restrictions. Each party also acknowledges that any breach by it of
Section 8.07 hereof will cause continuing and irreparable injury to the
other party for which monetary damages would not be an adequate remedy.
Each party agrees that it shall not, in any action or proceeding to enforce
any of the provisions of this Agreement, assert the claim or defense that
an adequate remedy at law exists. In the event of such breach by a party
hereto, the other party shall have the right to enforce the provisions of
Section 8.07 of this Agreement by seeking injunctive or other relief in any
court, without a requirement that a bond be posted, and this Agreement
shall not in any way limit remedies of law or in equity otherwise available
to the other party.
(ii) The one year periods contained in this Section 8.07 shall
not include, and shall be deemed extended by, any time required for
litigation to enforce the relevant covenants; provided, that the party
seeking to enforce such covenant is successful on the merits in any such
litigation; and provided, further, that such period shall only be extended
to include the time required for litigation if such litigation is commenced
by the filing of an action against a party hereto prior to the expiration
of the unextended period. The "time required for litigation" is herein
defined to mean the period of time from the earlier of a party's first
breach as determined by such litigation or settlement thereof of such
covenants or service of process upon such party through the earlier of the
settlement of or the expiration of all appeals related to such litigation.
Section VIII.08 Shareholder Guarantees. Buyer will use
commercially reasonable efforts to assist Shareholder in obtaining releases
in full from its obligations under and pursuant to the liabilities,
agreements and guarantees set forth in Exhibit 8.08.
Section VIII.09 Mutual Cooperation. The parties hereto will
cooperate with each other, and will use all commercially reasonable efforts
to cause the fulfillment of the conditions to the parties' obligations
hereunder and to obtain as promptly as possible all consents,
authorizations, orders or approvals from each and every third party,
whether private or governmental, required in connection with the
transactions contemplated by this Agreement.
Section VIII.10 Collection of Receivables. (a) Buyer shall use
its commercially reasonable efforts to collect the Receivables acquired by
Buyer on the Closing Date. Buyer shall allocate all amounts collected with
respect to such Receivables to the earliest invoices outstanding for a
particular customer except where a particular customer identifies an amount
to a particular invoice or an invoice issued by a GECITS Entity. Any
Receivables acquired by Buyer on the Closing Date that remain uncollected
on the date one hundred twenty (120) days following the Closing Date may be
assigned by Buyer to XLSource on or before the date 150 days following the
Closing Date. XLSource shall pay Buyer, in immediately available funds on
the date of such assignment, an amount equal to the sum of the outstanding
amount of such Receivables so assigned and any accrued and unpaid Costs of
Carry.
(b) Shareholder and Sellers, jointly and severally, agree to
reimburse Buyer monthly in advance for Buyer's cost to carry the
uncollected Receivables acquired by Buyer on the Closing Date at a rate
equal to 6.5% per annum on the average monthly outstanding uncollected
balance of such Receivables (the "Costs of Carry"). On the Closing Date,
Shareholder and Sellers shall pay Buyer an amount equal to one month's Cost
of Carry at such rate on outstanding uncollected Receivables balance on the
Closing Date. On the last day of the month immediately following the month
in which the Closing Date occurs, and on the last day of each succeeding
month, Buyer shall calculate the difference between (i) the Costs of Carry
for the next succeeding month with respect to the outstanding uncollected
Receivables balance on such date less (ii) an amount equal to one-half of
the sum of the outstanding uncollected Receivables balance on the first day
(or, in the case of the first such month, on the Closing Date) and the last
day of such month multiplied by 6.5% and divided by twelve. If such
difference is a negative number, Buyer shall pay such amount to XLSource.
If such difference is a positive number, Shareholder and Sellers shall pay
such amount to Buyer. Shareholder's and Sellers' obligation to pay Costs
of Carry shall immediately terminate as of the date Buyer permanently
retains any uncollected Receivables acquired by Buyer on the Closing Date,
either voluntarily or due to the expiration of the period during which
Buyer may assign such Receivables to XLSource as set forth above in Section
8.10(a) and after payment of any accrued and unpaid Costs of Carry.
(c) XLSource may, at any time, repurchase the uncollected
Receivables acquired by Buyer on the Closing Date for a purchase price
equal to the sum of the outstanding amount of such Receivables and any
accrued and unpaid Costs of Carry. Subject to Section 8.10(a), XLSource
shall give Buyer at least thirty (30) business days notice of its intent to
repurchase such uncollected Receivables. On the date of such repurchase,
Buyer shall assign such Receivables to XLSource.
Section 8.11 Seller Employee Benefits and Employment. (a) Buyer
will provide Sellers and Shareholder with a list of the proposed
Transferred Employees at least five (5) days prior to the Closing Date.
All Company Personnel who are not Transferred Employees shall remain
employees of Shareholder or any of its Affiliates, unless otherwise
terminated by Shareholder, Sellers or any of their Affiliates. Shareholder
shall retain liability and responsibility for any benefits with respect to
such employees. Sellers and Shareholders shall be and remain responsible
for all payments under the Retention Agreements with John Biasiello, Sean
Barton, Michelle Curry, Darryl Dunn, Thomas Evans, Daniel Sparks, Patti
Thelen and Todd Welch.
(b) Effective as of the Closing, the active participation of
any Transferred Employee in any Sellers Benefit Plan will terminate and no
further benefits shall accrue under any Seller Benefit Plan with respect to
any Transferred Employee or any beneficiary of any Transferred Employee.
No provision of this Section 8.01(m) shall create any right in any
Transferred Employee or in his or her beneficiaries. Shareholder or
Sellers shall cause each Sellers Benefit Plan which is a "pension plan"
within the meaning of Section 3(2) of ERISA, or any successor plan thereto,
to be amended to provide full vesting for Transferred Employees. Buyer or
any of its Affiliates shall recognize prior service with Shareholder,
Seller or any of their subsidiaries to the extent recognized under the
Shareholder's corresponding plans for such Transferred Employees prior to
the Closing as service with Buyer or any of its Affiliates in connection
with (1) any welfare benefit plan for purposes of any waiting period and
eligibility purposes and application of preexisting conditions exclusions
and credit for prior payment in the same calendar year toward deductibles
and out-of-pocket limits, and (2) any pension plan for purposes of
eligibility and vesting only in which such Transferred Employees elect to
participate and which is available by Buyer or any of its Affiliate
following the Closing.
(c) Neither Buyer or Sellers shall assume any obligations
under or with respect to any Sellers Benefit Plan.
(d) Shareholder and its respective Affiliates shall retain
all liability and be responsible for, and shall indemnify and hold Buyer
harmless from and against any direct and indirect costs, claims,
liabilities or losses with respect to (i) Sellers Benefit Plans with
respect to employment by Shareholder, Sellers or any of their subsidiaries
prior to the Closing, (ii) any retiree medical benefits provided under any
Sellers Benefit Plan, (iii) any former employees of Shareholder, Sellers or
any of their subsidiaries other than Transferred Employees, including, but
not limited to, post-employment benefits and (iv) any costs arising in
connection with the severance of any employees of Shareholder, Sellers or
any of their subsidiaries prior to the Closing, including, but not limited
to, costs arising under or with respect to WARN, not as a result of actions
taken by Buyer or any of its Affiliates.
(e) Buyer's obligation to provide any benefit package to the
Transferred Employees as set forth in this Section 8.11 is subject to the
approval of the GE Pension Board.
Section 8.12 Ingram Micro Inc. Agreement. On the later of the
RND Closing Date, and the Closing Date, Buyer or another GECITS Entity
shall execute and deliver a Resale Agreement with Ingram Micro Inc. in
substantially the form previously provided to XLSource and Shareholder and
XLSource shall execute and deliver an amendment to that certain Volume
Purchase Agreement dated as of April 29, 1997 by and between Shareholder,
XLSource and Ingram Micro Inc. in substantially the form previously
provided to Buyer, in each case, subject to such completions, corrections
and other nonsubstantive modifications as may be mutually agreed and to the
execution and delivery thereof by Ingram Micro Inc. of each of such
agreements. If the RND Closing Date does not occur on or before September
1, 1997, at the written request of Shareholder and upon a demonstration by
Shareholder (which demonstration shall be reasonably satisfactory to Buyer)
that Shareholder's ability to provide all or any portion of the product to
be acquired from Ingram Micro, Inc. pursuant to such Resale Agreement is
substantially equivalent to that of Ingram Micro Inc., Buyer will utilize
Shareholder among its tier one integrators.
Section 8.13 Obligation to Transfer all Account Knowledge. (a)
Each of Shareholder, Sellers and XLConnect hereby agree and agree to use
their best efforts to cause each of their Affiliates to use its Best
Efforts to Transfer all Account Knowledge with respect to the accounts
listed on Exhibit 8.13 to Buyer. Each of Shareholder, Sellers and
XLConnect acknowledge that irreparable damage would result to Buyer if the
provisions of this Section 8.13 were not complied with in accordance with
their respective terms and that the amount of such damage is not easily
quantifiable. Accordingly, each of Shareholder and Sellers agree that if
the obligations of Seller, Shareholder and XLConnect under this Section
8.13 are not performed with respect to any account listed on Exhibit 8.13
within six months following the Closing Date, Shareholder and Sellers,
jointly and severally, shall pay to Buyer an amount equal to $1,000,000
(One Million Dollars) as liquidated damages with respect to each such
account, and none of Sellers, Shareholders or XLConnect shall have any
other liability to Buyer for any breach of this Section 8.13.
(b) Buyer acknowledges and agrees that the obligations of
Shareholder, Sellers and XLConnect under this Section 8.13 do not
constitute a guarantee of the amount of future revenues that Buyer will
realize from any of the accounts listed on Exhibit 8.13.
Section 8.14 XLC Common Customers. As soon as practicable
following the date hereof, Buyer shall provide to XLSource a list of the
XLC Common Customers.
Section 8.15 XLConnect Service Agreement. On the Closing Date
XLConnect will enter into a service agreement with Buyer or another GECITS
Entity pursuant to which XLConnect will agree to provide management
services in a manner and to an extent reasonably consistent with past
practices as reasonably required by Buyer or such other GECITS Entity with
respect to the agreement referred to in item 19A of Exhibit 5.01(d)(1)(A).
XLConnect will provide such services for a period ending six months
following the Closing Date unless extended by mutual agreement. Thirty
days prior to the end of the term of such service agreement, XLConnect will
use its best efforts to assist Buyer or such GECITS Entity in employing
those of the XLConnect employees providing the services under such service
agreement that XLConnect and Buyer or such GECITS Entity mutually agree may
be employed by Buyer or such GECITS Entity. If the agreement referred to
in such item 19A is terminated prior to the date six months following the
Closing Date or if as renegotiated is not acceptable to Buyer, XLConnect
will refund to Buyer an amount calculated in accordance with Exhibit 8.15.
ARTICLE IX
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Miscellaneous
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Section IX.01 Expenses. Regardless of whether the transactions
contemplated hereby are consummated, each of the several parties hereto
shall bear the fees and expenses relating to its compliance with the
various provisions of this Agreement and its covenants to be performed
hereunder, and each of such parties shall pay all expenses (including legal
fees and expenses) incurred by it in connection with this Agreement and the
transactions contemplated hereby.
Section IX.02 Termination of Agreement. This Agreement may be
terminated at any time prior to Closing:
(a) by mutual written consent of Buyer, Sellers and
Shareholder;
(b) by either Buyer or Sellers and Shareholder if any of the
representations or warranties of the other party contained herein shall be
inaccurate or untrue in any material respect;
(c) by either Buyer or Sellers and Shareholder if any
obligation, term or condition to be performed, kept or observed by such
other party hereunder has not been performed, kept or observed in any
material respect at or prior to the time specified in this Agreement;
(d) by either Buyer or Sellers and Shareholder if any
permanent injunction or other order of a court or other competent authority
preventing the consummation of the transactions contemplated by this
Agreement shall have become final and non-appealable;
(e) by either Buyer or Sellers and Shareholder, if not then
in material breach of any of its obligations hereunder, if the Closing has
not occurred by August 2, 1997;
(f) by Buyer, if not then in material breach of any of its
obligations hereunder, within five (5) business days after delivery by
Sellers of the Sellers Update Exhibits to the extent such Sellers Update
Exhibits disclose any items which in the Buyer's reasonable judgement,
would have a material adverse effect on the operations, assets, properties,
rights or condition (financial or otherwise) of the Business compared to
that existing on the date hereof;
(g) by Sellers and Shareholder if Ingram Micro Inc. shall not
have entered into an amendment to the Stock Purchase Agreement dated as of
April 29, 1997 among Ingram Micro Inc., Shareholder and XLSource in a form
reasonably satisfactory to Shareholder and XLSource on or before July 4,
1997.
Section IX.03 Effect of Termination. In the event of the
termination of this Agreement pursuant to Section 9.02, all obligations of
the parties hereunder shall terminate without any liability of any party to
another party; provided, however, that if this Agreement is terminated
under the provisions of Section 9.02(b) or (c) by reason of the breach of
an obligation, term or condition to be performed, kept or observed by one
party, the provisions of this Section 9.03 shall not relieve such breaching
party of liability for such breach.
Section IX.04 Benefit; Assignment. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns and not to any other person. This
Agreement shall not be assigned by any party hereto without the written
consent of each of the other parties hereto, except that (a) the rights and
obligations of Buyer may be assigned to any wholly-owned subsidiary of
Buyer or any entity under common control with Buyer, but no such transfer
shall relieve Buyer of its obligations hereunder, and (b) the rights and
obligations of Buyer may be assigned in connection with the dissolution of
Buyer or the merger of Buyer into or sale by Buyer of substantially all its
assets and business to a third party if the successor shall have assumed
all the obligations of the dissolving, merging or selling entity (but, in
the case of a sale of substantially all the assets, without relieving Buyer
of its obligations hereunder).
Section IX.05 Governing Law. This Agreement shall be construed
and enforced in accordance with and governed by the laws of the
Commonwealth of Pennsylvania.
Section IX.06 Breach; Failure of Condition. If either party
shall believe at any time prior to the Closing Date that any other party
has breached any representation, warranty, covenant or agreement contained
in this Agreement, or that any condition to the Closing is not reasonably
likely to be satisfied, such party shall promptly so inform such other
party specifying the breach or condition concerned, and such other party
shall have a reasonable opportunity to correct such breach or cause such
condition to be satisfied, but failure to so notify shall not release the
other party from its obligations hereunder.
Section IX.07 Notices, Etc. All notices, requests, demands and
other communications hereunder shall be in writing and shall be delivered
in person or by courier, telegraphed, telexed or by facsimile transmission
or mailed by certified or registered mail first-class, postage prepaid:
If to Sellers, Shareholder or XLConnect:
Intelligent Electronics, Inc.
411 Eagleview Boulevard
Exton, PA 19341
Attn: President
Telecopy No.: (610) 458-0599
with a copy to:
Barry Abelson, Esq.
Pepper Hamilton & Scheetz
3000 Two Logan Square
Eighteenth and Arch Street
Philadelphia, PA 19103-2799
Telecopy No.: (215) 981-4750
If to Buyer:
GE Information Technology Solutions Acquisition Corp.
700 Canal Street
Stamford, Connecticut 06902
Attention: Vice President - Business Development
Telecopy No.: (203) 357-1531
with a copy to:
E. Ann Gill, Esq.
Dewey Ballantine
1301 Avenue of the Americas
New York, New York 10019
Telecopy No.: (212) 259-6333
Any such notice, request, demand or other communication hereunder shall be
deemed to have been duly given or made and to have become effective (a) if
delivered by hand, at the time of receipt thereof, (b) if sent by
telegraph, telex or facsimile transmission, at the time of the dispatch
thereof, if dispatched during normal business hours in the state of
receipt, or otherwise at the opening of business on the following business
day in the state of receipt and (c) if sent by registered or certified
first class mail, postage prepaid, upon receipt.
Any party may, by written notice to the other, change the address
to which notices to such party are to be delivered or mailed.
Section IX.08 Headings. The headings of the articles, sections
and paragraphs contained in this Agreement are inserted for convenience
only and in no way modify the meanings of such articles, sections and
paragraphs.
Section IX.09 Counterparts. This Agreement may be executed in
one or more counterparts, each of which shall be deemed to be an original,
but all of which together shall constitute one and the same instrument.
This Agreement shall become effective when one or more counterparts have
been signed by each of the parties hereto and delivered to the other
parties.
Section IX.10 Entire Agreement. This Agreement and the other
agreements referred to herein and entered into in connection herewith set
forth the entire agreement and understanding of the parties in respect of
the transactions contemplated hereby and supersede all prior agreements,
arrangements and understandings relating to the subject matter hereof
including all such agreements, arrangements and understandings between
Sellers, Shareholder and Buyer, except for that certain confidentiality
agreement dated April 1, 1997 by and between Shareholder and GE Capital
Information Technology Solutions, Inc.
Section IX.11 Waiver; Amendment; Modification. Any party to
this Agreement may, by written agreement (a) extend the time for the
performance of any of the obligations or other acts of the other parties
hereto, (b) waive any inaccuracies or breaches in the representations and
warranties of the other parties contained in this Agreement or in any
document delivered pursuant to this Agreement or (c) waive compliance with
any of the agreements or conditions of the other party contained herein.
Any such extension or waiver shall be valid only if set forth in an
instrument in writing signed by the party to be bound thereby. Any waiver
of any term or condition shall not be construed as a waiver of any
subsequent breach or a subsequent waiver of the same term or condition, or
a waiver of any other term or condition, of this Agreement. The failure of
any party to assert any of its rights hereunder shall not constitute a
waiver of any of such rights. This Agreement may be amended or modified
only by a written agreement executed by the parties hereto or by their
successors and assigns.
Section IX.12 Severability. To the extent that any provision of
this Agreement shall be invalid or unenforceable, it shall be considered
deleted herefrom and the remainder of such provision and of this Agreement
shall be unaffected and shall continue in full force and effect. In
furtherance and not in limitation of the foregoing, if the duration or
geographic extent of, or business activity covered by, any provision of
this Agreement shall be in excess of that which is enforceable under
applicable law, then such provision shall be construed to cover only that
duration, extent or activities which may be validly and enforceably
covered.
Section IX.13 Press Releases. Neither Sellers, Shareholder nor
Buyer shall issue any press releases or make any public announcements of
any of the transactions contemplated by this Agreement except as may be
mutually agreed to in writing by Sellers, Shareholder and Buyer; provided,
however, that notwithstanding the foregoing, Sellers, Shareholder and Buyer
shall be permitted to make such disclosures to the public or governmental
authorities as their respective counsel shall deem necessary to maintain
compliance with, or to prevent violation of, applicable laws, rules and
regulations.
Section IX.14 HSR Filing. As promptly as practicable, and in
any event no later than five business days following the date hereof,
Buyer, Shareholder and Sellers shall make any filing required pursuant to
the HSR Act. Buyer, Shareholder and Sellers shall promptly and diligently
provide any additional information required or reasonably requested in
order to comply with the requirements of the HSR Act.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement the day and year first above written.
GE INFORMATION TECHNOLOGY SOLUTIONS ACQUISITION
CORP., as Buyer
By: /s/ Gerald A. Poch
----------------------------------------------
Name: Gerald A. Poch
Title: Chairman of the Board and President
THE FUTURE NOW, INC.,
as Seller
By: /s/ Alan Resneck
----------------------------------------------
Name: Alan Resneck
Title: Vice President, Secretary and Treasurer
XLSOURCE, INC.,
as Seller
By: /s/ Alan Resneck
----------------------------------------------
Name: Alan Resneck
Title: Vice President, Secretary and Treasurer
E-C COMPUTER TECHNICAL SERVICES, INC.,
as Seller
By: /s/ Alan Resneck
----------------------------------------------
Name: Alan Resneck
Title: Vice President, Secretary and Treasurer
RCK COMPUTERS, INC.,
as Seller
By: /s/ Alan Resneck
----------------------------------------------
Name: Alan Resneck
Title: Vice President
INTELLIGENT ELECTRONICS, INC., as Shareholder
By: /s/ Richard D. Sanford
----------------------------------------------
Name: Richard D. Sanford
Title: Chairman of the Board and Chief
Executive Officer
<PAGE>
XLCONNECT SOLUTIONS, INC., XLCONNECT
SERVICES, INC. and XLCONNECT SYSTEMS,
INC., each hereby agrees to and
accepts its obligations under Section 2.01,
Section 4.02, Section 8.01(a)(vi), Section 8.07(a),
Section 8.13 and Section 8.15 hereof and makes
the representation made in Section 5.03 hereof.
XLCONNECT SOLUTIONS, INC.
By: /s/ Timothy Wallace
-----------------------------------------------
Name: Timothy Wallace
Title: President
XLCONNECT SERVICES, INC.
By: /s/ Timothy Wallace
-----------------------------------------------
Name: Timothy Wallace
Title: President
XLCONNECT SYSTEMS, INC.
By: /s/ Timothy Wallace
-----------------------------------------------
Name: Timothy Wallace
Title: President
GE CAPITAL INFORMATION TECHNOLOGY
SOLUTIONS, INC. hereby guarantees the
obligations of Buyer and the GECITS
Entities pursuant to Section 8.07(b).
GE CAPITAL INFORMATION TECHNOLOGY
SOLUTIONS, INC.
By: /s/ Gerald A. Poch
-----------------------------------------------
Name: Gerald A. Poch
Title: President
<PAGE>
Attachment A
------------
DEFINITIONS
-----------
"Acquired Sites" shall mean: (i) 4006 Beltline Road, Addison,
Texas; (ii) 8560 Howard Drive, Houston, Texas; (iii) 12731 Research
Boulevard, Building B, Austin, Texas; (iv) 242 East Campus Boulevard,
Columbus, Ohio; (v) 5201 Sanger Avenue, Waco, Texas and (vi) 41521 Eleven
Mile Road, Novi, Michigan.
"Agreement" shall mean this Asset Purchase Agreement.
"Affiliate" shall mean, with respect to any Person, any Person
that, directly or indirectly, controls, is controlled by or is under common
control with such Person. For the purposes of this definition, "control"
(including, with correlative meanings, the terms "controlled by" and "under
common control with"), as used with respect to any Person, shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through
the ownership of voting securities or by contract or otherwise.
"Assigned Agreements" shall mean (i) the Leases, (ii) Article 5
of the Agreement and Plan of Merger, dated as of December 23, 1996, by and
among Shareholder and Voyage (Waco) Acquisition Corporation and RCK
Computers, Inc. and G. Kenneth Anderson, M. Chris Brammer, F. Stephen
Cunningham and D. Scott Short, (iii) Non-Compete and Confidentiality
Agreement dated December 23, 1996 by G. Kenneth Anderson for the benefit of
Shareholder and its subsidiaries, (iv) Non-Compete and Confidentiality
Agreement dated December 23, 1996 by M. Chris Brammer for the benefit of
Shareholder and its subsidiaries, (v) Non-Compete and Confidentiality
Agreement dated December 23, 1996 by F. Stephen Cunningham for the benefit
of Shareholder and its subsidiaries, (vi) Non-Compete and Confidentiality
Agreement dated December 23, 1996 by D. Scott Short for the benefit of
Shareholder and its subsidiaries, (vii) Article 5 of the Agreement and Plan
of Merger, dated as of October 23, 1996, by and among Shareholder, Voyage
(Texas) Acquisition Corporation, E-C Computer Technical Services, Inc. and
Jason Edwards, Kevan Casey, Charles Casey, and Samuel Rose, (viii) Non-
Compete and Confidentiality Agreement dated October 23, 1996 by Jason
Edwards for the benefit of Shareholder and its subsidiaries, (ix) Non-
Compete and Confidentiality Agreement dated October 23, 1996 by Kevan Casey
for the benefit of Shareholder and its subsidiaries, (x) Non-Compete and
Confidentiality Agreement dated October 23, 1996 by Charles Casey for the
benefit of Shareholder and its subsidiaries, (xi) Non-Compete and
Confidentiality Agreement dated October 23, 1996 by Samuel Rose for the
benefit of Shareholder and its subsidiaries and (xiii) all business
agreements, leases, contracts, documents and instruments of the Sellers
described on Exhibit 5.01(d)(1)(A), which relate to the Business of Sellers
and any renewals, extensions, amendments or modifications thereof;
provided, however, in the case of agreements with customers other than the
Power by the Hour Agreements, such agreements constitute Assigned
Agreements solely to the extent of the provisions thereof that are not
Service Portions. The description of each such agreement includes the name
and date of, and the parties to, each such agreement, a brief description
of the subject matter thereof and indicates whether any consent is required
for the assignment of such agreement by Sellers to Buyer, as contemplated
by the Agreement.
"Assignment Agreement" shall mean an assignment and assumption
agreement between Buyer, Sellers and XLConnect in substantially the form of
Exhibit A-1.
"Assumed Liabilities" shall be limited to (a) the trade payables
of E-C Computer Technical Services, Inc. and RCK Computers, Inc. and the
accrued employee expenses with respect to Transferred Employees, in each
case as reflected on the Closing Date Balance Sheet, (b) obligations
arising under the Leases becoming due after the Closing Date and (c)
obligations under the Assigned Agreements becoming due after the Closing
Date or reflected on the Closing Date Balance Sheet.
"Best Efforts to Transfer All Account Knowledge" shall mean the
taking of all actions reasonably requested by Buyer to transfer to Buyer
all customer account information (written or unwritten) for the customers
listed on Exhibit 8.13 with respect to the Business. Such actions shall
include but shall not be limited to (a) attending and engaging in
meaningful discussion at meetings between representatives of Buyer and the
GECITS Entities at mutually satisfactory times and locations and the
appropriate representatives of Shareholder, Seller, XLConnect and their
Affiliates, employees and, to the extent within the reasonable control of
Shareholder, Sellers or XLConnect, independent contractors who have
customer knowledge or contact with the customers listed on Exhibit 8.13,
which meetings shall be held weekly during the first three months following
the Closing Date and as reasonably requested by Buyer thereafter (notice of
all meetings will be given to the President of XLConnect and to Pepper
Hamilton & Scheetz LLP, attention Barry M. Abelson, but failure to give
such notice shall not affect any obligation of Shareholder, Sellers or
XLConnect other than the obligation to attend the meeting for which notice
is not given), (b) providing written reports to Buyer with respect to such
customer account information, (c) using reasonable commercial efforts to
arrange and attending meetings with the customers listed on Exhibit 8.13
and representatives of Buyer and the GECITS Entities and (d) generally
acting as an advocate of Buyer with respect to the Business from the
customers listed on Exhibit 8.13. Customer account information shall not
include information of XLConnect which relates to its Computer Services
business and not to the Business or information of Sellers and Shareholders
which relates to Sellers business at the Retained Sites and not to the
Business.
"Business" shall mean the Sellers' business of reselling
microcomputer and technology products conducted at the Acquired Sites and
the Other Sites prior to the Closing Date and the Power by the Hour
Agreements. The term Business shall not include Sellers' business of
reselling microcomputer and technology products conducted at the Retained
Sites.
"Claim" shall have the meaning set forth in Section 8.03(d).
"Closing" shall have the meaning provided in Section 4.01 of the
Agreement.
"Closing Date" shall have the meaning provided in Section 4.01 of
the Agreement.
"Closing Date Balance Sheet" shall have the meaning provided in
Section 3.01(c) of the Agreement.
"Closing Date Physical Count" shall have the meaning provided in
Section 3.01(c).
"Code" shall mean the Internal Revenue Code of 1986, as amended
and the regulations promulgated thereunder.
"Company Personnel" shall mean current or former employees,
officers, directors, or consultants of Sellers.
"Common XLS Transferred Customer" shall refer to any XLS
Transferred Customer to whom Sellers or Shareholder sells computer products
from the Retained Sites and who is listed on Exhibit 8.07(e).
"Computer Services" shall mean systems integration and
internetworking of hardware and software (including consulting and design),
training and learning services, remote systems or network management
services, applications help-desk services, applications development
services and combined installation, moving, adding and changing (IMAC)
services that require on-site personnel. "Computer Services" shall not
mean (a) pre-delivery or pre-installation configuration of hardware and
software, (b) warranty and out-of-warranty repair and break and fix
services for hardware and services customers provided on a dispatch basis
or by two or less persons on site who do not provide more than a de minimis
amount of IMAC, (c) non-applications help desk services, (d) remote site
disaster recovery services or (e) any other services that Buyer or its
assigns is required to provide pursuant to the Assigned Agreements.
"Costs of Carry" shall have the meaning provided in Section
8.10(b).
"Customer Data" shall mean Sellers' and Shareholder's lists of
customers and clients of the Business as set forth on Exhibit 5.01(d)(1)(B)
and all records regarding such customers and clients.
"Direct Payment" shall have the meaning provided in Section
3.01(b) of the Agreement.
"Employee Pension Benefit Plan" shall have the meaning ascribed
to such term by Section 3(2) of ERISA.
"Employment Contracts" shall mean all employment contracts,
consulting agreements and collective bargaining agreements with respect to
employees employed in the Business.
"Encumbrance" shall mean any security interest, mortgage, option,
financing lease, pledge, hypothecation, assignment, deposit arrangement,
encumbrance, lien (statutory or otherwise), charge against or interest in
property to secure payment of a debt or performance of an obligation or any
other priority or preferential arrangement to secure a debt or the
performance of an obligation (including the filing or recording of any
financing statement or similar instrument under the UCC or similar statute)
of any kind or nature whatsoever.
"Environmental Laws" shall mean all Federal, state or local
judgments, decrees, orders, laws, licenses, ordinances, rules or
regulations pertaining to environmental matters, including, without
limitation, those arising under the Resource Conservation and Recovery Act
(42 U.S.C. Section 1801 et seq.) ("RCRA"), the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended (42 U.S.C.
Section 9601 et seq.) ("CERCLA"), the Superfund Amendments and Reauthorization
Act of 1986, the Federal Clean Water Act (33 U.S.C. Section 1251 et seq.)
("SARA"), the Federal Clean Air Act (33 U.S.C. Section 7401 et seq.), the
Toxic Substances Control Act (15 U.S.C. Section 7401 et seq.), the Federal
Insecticide, Fungicide and Rodenticide Act (7 U.S.C. Section 136 et seq.),
and the Occupational Safety and Health Act (29 U.S.C. Section 651 et seq.).
"Environmental Liabilities and Costs" shall mean all Losses,
whether direct or indirect, known or unknown, current or potential, past,
present or future, imposed by, and under or pursuant to Environmental Laws,
including, without limitation, all Losses related to remedial actions, and
all fees, disbursements and expenses of counsel, experts, personnel and
consultants based on, arising out of, or otherwise in respect of (a) the
ownership or operation of the Business or Leases or any other real
properties, assets, equipment or facilities, by the Shareholder, any
Seller, or any of their respective predecessors or Affiliates, (b) the
environmental conditions existing on the Closing Date on, under, above, or
about any property subject to Leases or any other real properties, assets,
equipment or facilities currently or previously owned, leased or operated
by the Shareholder, any Seller, or any of their respective predecessors or
Affiliates, and (c) expenditures necessary to cause any property subject to
Leases or any aspect of the Business to be in compliance with any and all
requirements of Environmental Laws as of the Closing Date, including,
without limitation, all environmental permits issued under or pursuant to
such Environmental Laws.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"ERISA Affiliate" shall mean any trade or business (whether or
not incorporated) which are or have ever been under common control, or
which are or have been treated as a single employer, with Sellers under
Section 414(b), (c), (m), or (o) of the Code.
"Escrow Agent" shall mean Chase Manhattan Bank.
"Escrow Agreement" shall have the meaning provided in Section
3.01(b) of the Agreement.
"Escrow Account" shall mean the escrow account set up pursuant to
the Escrow Agreement.
"Escrow Deposit" shall have the meaning provided in Section
3.01(b) of the Agreement.
"Excluded Assets" shall mean all assets of Sellers and
Shareholder other than the Purchased Assets.
"Excluded Intangibles" shall mean the name "XLSource, Inc.", the
name "The Future Now, Inc., the pending trademark registration for
"XLSource," the registered trademark "The Future Now" and the Oracle
software license.
"Excluded Liabilities" shall mean all claims, liabilities and
obligations of Shareholder and Sellers relating to the Business (other than
the Assumed Liabilities) and shall include, without limitation:
(a) all claims, liabilities and obligations of Shareholder or
Sellers whether or not reflected on the Closing Date Balance Sheet that are
not Assumed Liabilities;
(b) claims, liabilities and obligations of Sellers or
Shareholder under this Agreement;
(c) claims, liabilities and obligations of Sellers or
Shareholder in respect of Taxes and in respect of any violations of
Environmental Laws;
(d) claims, liabilities and obligations of Sellers or
Shareholder in respect of litigation disclosed in Exhibit 5.01(e) or
otherwise affecting the Business and related to or arising out of the
operation of the Business prior to the Closing Date and liabilities and
obligations listed in Exhibit 8.08;
(e) fees and expenses of Sellers or Shareholder in connection
with the negotiation of or consummation of the transactions contemplated by
this Agreement; and
(f) claims, liabilities and obligations of Sellers under any
Sellers Benefit Plan and any Employment Contracts; and
(g) all outstanding obligations for money borrowed or guarantees
thereof of the Sellers or the Shareholder with respect to the Business,
including, but not limited to, those set forth on Exhibit 8.08, in each
case, in the amounts and to the extent reflected on Sellers' and
Shareholder's respective books on the Closing Date.
"February 1 Balance Sheet" shall have the meaning provided in
Section 5.01(j) of the Agreement.
"February 1 Balance Sheet Date" shall have the meaning provided
in Section 5.01(j) of the Agreement.
"Fixed Assets" shall mean the fixtures, equipment, leasehold
improvements, security systems, telephone systems, display stands,
furniture and similar furnishings (a) located at the Acquired Sites or at
holding areas for the Acquired Sites, in each case, as listed on Exhibit
5.01(d)(1)(C) and (b) located at the Other Sites or at holding areas for
the Other Sites and purchased by Buyer in accordance with Section 8.01(m).
"GAAP" shall mean generally accepted accounting principles, as
presently in effect in the United States.
"GECITS" shall mean GE Capital Information Technology Solutions,
Inc.
"GECITS Entities" shall mean GECITS and its direct and indirect
subsidiaries.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended, and the rules and regulations thereunder.
"Hazardous Material" shall mean any and all hazardous wastes,
that in any physical state, might represent danger to the environmental
balance because of their corrosive, toxic, venomous, reactive, explosive,
flammable, biological or irritate conditions, such as: (a) any petroleum
or petroleum products, flammable explosives, radioactive materials,
asbestos in any form that is or could become friable, urea formaldehyde
foam insulation, transformers or other equipment that contain dielectric
fluid containing levels of polychlorinated biphenyl, and radon gas; (b) any
chemicals, materials, substances or wastes which are now or hereafter
become defined as or included in the definition of "hazardous substances",
"hazardous wastes", "toxic substances", "toxic pollutants", or words of
similar import, under any applicable Environmental Laws; and (c) any other
chemical, material, substance, or waste, exposure to which is now or
hereafter prohibited, limited or regulated by any Environmental Law or by
any Federal, state or municipal authority.
"Intangibles" shall mean the Intellectual Properties, all
goodwill and all other general intangibles of Sellers or Shareholder used
in the Business described on Exhibit 5.01(d)(1)(D).
"Intellectual Properties" shall mean all patents of any
description and pending applications therefor, all registrations of
trademarks and of other marks, all registrations of trade names, assumed
names, service marks, logos, labels or other trade rights, all pending
applications for any such registrations, all copyright registrations and
pending applications therefor, all other copyrights, trademarks and other
marks, trade names, assumed names, service marks, logos, jingles, program
rights, non-governmental licenses, computer programs and slogans, and all
other inventions and designs, whether or not patentable, described on
Exhibit 5.01(d)(1)(D).
"Inventory" shall mean all products physically held or in transit
for sale or lease and service parts and components (in each case without
regard to physical location) in the ordinary course of the Business, listed
on Exhibit 5.01(d)(1)(E).
"IRS" shall mean the Internal Revenue Service.
"Knowledge" shall mean the actual knowledge of the directors and
officers and management personnel of Sellers and Shareholder identified on
Schedule A.
"Leases" shall mean the leases described on Exhibit 5.01(d)(4)
pursuant to which Sellers or Shareholder, as lessee, leases the Acquired
Sites.
"Lien" shall mean any liens, mortgages, judgments, pledges,
charges, claims, attachments, adverse interests, security interests
(including financial leases), rights to possession or custody, bailments,
trespasses, liabilities and other encumbrances.
"Net Assets Acquired" shall mean, at any date, the net book value
of the Purchased Assets less the aggregate amount of the Assumed
Liabilities and the amount of cash and cash equivalents other than Petty
Cash, in each case as set forth in the unaudited combined balance sheet of
the Business as of such date.
"Net Worth" shall mean, at any date, the sum of the net value of
the Shareholder's or its successor's assets less the aggregate amount of
the Shareholder's or its successor's, as applicable, liabilities, in each
case as set forth on the balance sheet of the Shareholder or its successor
as of such date.
"Other Property" shall mean the Customer Data, Fixed Assets,
telephone numbers and fax numbers for the Acquired Sites and Petty Cash
described on Exhibit 5.01(d)(1)(F).
"Other Sites" shall mean the locations from which the Business is
presently conducted at: (i) 1450 East American Lane, Schaumburg, Illinois;
(ii) 3712 South University Avenue, Little Rock, Arkansas; (iii) 2950 North
Loop West, Houston, Texas; (iv) 1780 Moriah Woods Boulevard, Suite 6,
Memphis, Tennessee; (v) 20900 Swenson Drive, Brookfield, Wisconsin; (vi)
2525 Perimeter Place Drive, Suite 210-211, Nashville, Tennessee; (vii) 3150
Clearview Way, Suite 100, San Mateo, California; (viii) 1946 Greenspring
Drive, Timonium, Maryland; (ix) 270 Spagnoli Road, Melville, New York; (x)
670 Crescentville Road, Cincinnati, Ohio; (xi) 9410 Bunsen Parkway,
Louisville, Kentucky; (xii) 940 Golden Valley Drive, Bettendorf, Iowa;
(xiii) 8151 Clayton Road, Clayton, Missouri; (xiv) 100 North Point Center
East, Alpharetta, Georgia and (xv) 18872 Burdeen Way, Irvine, California.
"PBGC" shall refer to the Pension Benefit Guaranty Corporation
established under Section 4002 of ERISA, or any entity succeeding to any or
all of its functions.
"Person" shall mean an individual, a partnership, a corporation,
an association, a joint stock company, a trust, a joint venture, an
unincorporated organization and a governmental entity or any department,
agency or political subdivision thereof.
"Petty Cash" shall mean all cash on hand at the Acquired Sites
and the Other Sites at the opening of business on the Closing Date.
"Post-Closing Adjustment" shall have the meaning provided in
Section 3.01(c) of the Agreement.
"Power by the Hour Agreements" shall mean (i) the Agreement for
Procurement of Services between General Electric Aircraft Engines and
XLConnect effective as of January 1, 1997, (ii) the Master Purchase
Agreement between Borden Chemical, Inc. and XLConnect dated July 19, 1996
and (iii) the agreement with Fluor Daniel with respect to life cycle
management services as set forth in correspondence between John E. Royer,
Jr. and Noel Eckert dated March 6, 1997.
"Purchase Price" shall have the meaning provided in Section
3.01(a) of the Agreement.
"Purchased Assets" shall mean the Inventory, Receivables,
Intellectual Properties, Other Property, rights under the Assigned
Agreements and all other assets set forth or which should, in accordance
with GAAP, be set forth on an unaudited combined statement of assets and
liabilities of the Business as of the Closing Date; provided, however, that
Purchased Assets shall not include (i) any Sellers' Benefit Plan or
Employment Contracts, (ii) any tax assets and (iii) Excluded Intangibles.
"RND Closing Date" shall mean the "Closing Date" as such term is
used in the Stock Purchase Agreement dated as of April 29, 1997 among
Ingram Micro Inc., Shareholder and XLSource.
"Receivables" shall mean all of the outstanding accounts
receivable without regard to any reserves with respect to the Business
listed on Exhibit 5.01(d)(1)(G), or arising from the lease or sale of goods
or for services rendered in the Business, including receivables relating to
contra-payable balances in the payable accounts for the Business and
receivables attributable to manufacturers' and other vendors' reimbursement
policies, but shall not include receivables due from Sellers Employees,
Sellers or Shareholder.
"Retained Sites" shall mean: (i) 2722 East Kemper Road,
Cincinnati, Ohio; (ii) 9455 Delegates Row, Indianapolis, Indiana, (iii) 309
Insurance Drive, Fort Wayne, Indiana, (iv) 107-113 Gamma Drive, O'Hara,
Pennsylvania and (v) 5350 Transportation Boulevard, Garfield Heights, Ohio.
"Returns" shall have the meaning provided in Section 5.01(k) of
the Agreement.
"Sellers Benefit Plan" shall refer to all Employee Benefit Plans
and all other employee benefit arrangements or payroll practices,
including, but not limited to, severance pay, sick leave, vacation pay,
salary continuation for disability, scholarship programs, stock option or
restricted stock plans maintained by Shareholder, Sellers or any Subsidiary
or ERISA Affiliate of either (whether formal or informal, whether for the
benefit of a single individual or for more than one individual and whether
for the benefit of current or former employees or their beneficiaries) on
behalf of Sellers, its Subsidiaries or any Company Personnel to which or
under which or pursuant to which Shareholder, Sellers or any Subsidiaries
or any ERISA Affiliate of either has contributed or is obligated to make
contributions on behalf of Seller, any of its Subsidiaries or any Company
Personnel.
"Sellers Employee" shall refer to any active employee on the
payroll of Shareholder or any of its Affiliates who devotes substantially
all of his or her working time to the performance of services in
furtherance of the Business as of February 1, 1997 or thereafter through
and including the Closing Date.
"Services Portions" shall mean those provisions of agreements
listed on Exhibit 5.01(d)(1)(A) (other than those entered into by E-C
Computer Technical Services, Inc. and RCK Computers, Inc.) with respect to
providing information technology services in the following areas:
(i) internetworking (the consulting, design, implementation and
integration of local area networks and wide area networks;
(ii) applications development (the customization and adaptation of
proven software as well as training and education to support
applications and internetworking solutions);
(iii) telecommunications (including data, video and voice
transmission); and
(iv) managed services (such as technology selection and deployment
services, combined installation, moving, adding and changing
services (IMAC), which include configuration of hardware and
software components at client sites, in warranty and out-of-
warranty break and fix services, help desk, network management
and asset management services.
"Subsidiary" means any corporation of which the shares of stock
having a majority of the general voting power in electing the board of
directors are, at the time as of which any determination is being made,
owned by XLSource either directly or indirectly through one or more
Subsidiaries.
"Survival Period" shall have the meaning provided in Section
8.03(a) of the Agreement.
"Tax" or "Taxes" shall mean all taxes, charges, fees, levies or
other assessments, including, without limitation, all net income, gross
income, gross receipts, sales, use, ad valorem, transfer, franchise,
profits, license, withholding, payroll, employment, excise, severance,
stamp, occupation, property or other taxes, customs, duties, fees,
assessments or charges of any kind whatsoever, together with any interest
and any penalties, additions to tax or additional amounts imposed by any
taxing authority (domestic or foreign) upon Sellers or any affiliate
thereof.
"Transferred Employee" shall refer to any Sellers Employee listed
on Exhibit 5.01(q)(3) that is hired by Buyer or its Affiliates as of the
Closing.
"Transition Services Agreement" shall mean the Transition
Services Agreement with respect to the matters described in Exhibit A-3.
"WARN" shall refer to the Workers Adjustment and Retraining
Notification Act, 29 U.S.C. Section 2101 et seq., and any comparable state or
local laws and regulations.
"XLS Transferred/XLC Customer" shall refer to any XLS Transferred
Customer that is also a customer to whom XLConnect provides Computer
Services with revenues in excess of $25,000 or more in 1996 or in the first
six months of 1997 on an annualized basis and is listed on Exhibit 8.07(d).
"XLConnect" shall mean XLConnect Solutions, Inc., a Pennsylvania
corporation, and each of its affiliates and subsidiaries other than the
Shareholder, The Future Now, Inc. and XLSource.
"XLC Common Customer" shall refer to any customer who is both an
XLS Transferred/XLC Customer and a customer to whom any GECITS Entities
provides Computer Services with revenues in excess of $25,000 or more in
1996 or in the first six months of 1997 on an annualized basis and is
listed on Exhibit 8.07(f).
"XLS Transferred Customer" shall refer to any customer to whom
Sellers or Shareholder is selling computer products in the Business as of
the Closing Date and is listed on Exhibit 8.07(c).
"XLSource" shall mean XLSource, Inc.
* * *
<PAGE>
ATTACHMENTS
Attachment A. Definitions
* * *
EXHIBITS
Exhibit A-1 Assignment Agreement
Exhibit A-2 Form of Escrow Agreement
Exhibit A-3 Form of Transitional Services Agreement
* * *
DISCLOSURE EXHIBITS
Exhibit 3.01(a)(1) Schedule of Net Assets Acquired as of May 3, 1997
Exhibit 3.01(a)(2) Allocation of Purchase Price Among Sellers
Exhibit 3.01(c) Closing Date Balance Sheet Adjustments
Exhibit 5.01(b) Stock Ownership
Exhibit 5.01(d)(1)(A) Assigned Agreements
Exhibit 5.01(d)(1)(B) Customer Data
Exhibit 5.01(d)(1)(C) Fixed Assets
Exhibit 5.01(d)(1)(D) Intangibles
Exhibit 5.01(d)(1)(E) Inventory
Exhibit 5.01(d)(1)(F) Other Property
Exhibit 5.01(d)(1)(G) Receivables
Exhibit 5.01(d)(2) Backorder Report for the Business
Exhibit 5.01(d)(4) Leases
Exhibit 5.01(d)(5) Description of the Business
Exhibit 5.01(e) Litigation
Exhibit 5.01(f) Conflicts with Law or Agreements
Exhibit 5.01(i) Exceptions to GAAP
Exhibit 5.01(m) Sellers' Benefit Plans
Exhibit 5.01(o) Insurance Policies
Exhibit 5.01(p)(2) Sellers' Confidentiality Agreements
Exhibit 5.01(q)(1) Sellers' Employees
Exhibit 5.01(q)(2) XLConnect/XLSource Employee Changes
Exhibit 5.01(q)(3) Sellers' Employees by Name and Function as of
February 1, 1997 and May 3, 1997
Exhibit 5.01(s) Related Party Transactions
Exhibit 5.01(t) Twenty Largest Clients
Exhibit 5.01(u) Certain Changes and Events since February 1, 1997
Exhibit 8.07(a) E-C Computer Technical Services, Inc. and RCK
Computers, Inc. and Certain Other Customers
Exhibit 8.07(c) XLS Transferred Customers
Exhibit 8.07(d) XLS Transferred Customers that are XLC Customers
Exhibit 8.07(e) Common XLS Transferred Customers
Exhibit 8.07(f) XLC Common Customers
Exhibit 8.08 Shareholder Guarantees
Exhibit 8.13 Best Efforts Accounts
Exhibit 8.15 Early Termination Calculation
Exhibit 2.4
FIRST AMENDMENT TO ASSET PURCHASE AGREEMENT
FIRST AMENDMENT TO ASSET PURCHASE AGREEMENT dated as of July 18,
1997 is by and among GE Capital Information Technology Solutions
Acquisition Corp., a Delaware corporation ("Buyer"), The Future Now, Inc.,
an Ohio corporation, XLSource, Inc., an Arkansas corporation, E-C Computer
Technical Services, Inc., a Texas corporation, RCK Computers, Inc., a Texas
corporation (The Future Now, Inc., XLSource, Inc., E-C Computer Technical
Services, Inc. and RCK Computers, Inc. are each a "Seller" and,
collectively, the "Sellers") and Intelligent Electronics, Inc., a
Pennsylvania corporation and, directly or indirectly, the sole shareholder
of Sellers ("Shareholder").
PRELIMINARY STATEMENT. The Buyer, the Sellers, and the
Shareholder have entered into an Asset Purchase Agreement dated July 1,
1997 (as modified, amended or supplemented from time to time, the
"Agreement"). Any term used herein and not otherwise defined herein shall
have the meaning assigned to such term in the Agreement.
Each of the parties hereto have agreed to amend the Agreement as
hereinafter set forth.
SECTION 1. Amendments to Agreement. The Agreement is, effective
as of the date hereof and subject to the satisfaction of the conditions
precedent set forth in Section 2 hereof, hereby amended as follows:
(1) Section 3.01, Purchase Price, is amended to delete the first
paragraph thereof and replace it with the following:
(a) The purchase price to be paid by Buyer for the Purchased
Assets and the assumption of the obligations of Sellers under the
Assigned Agreements and the assumption of the Assumed Liabilities (the
"Purchase Price") shall be an amount equal to the sum of
$94,240,000.00 (Ninety-Four Million Two Hundred Forty Thousand
Dollars), the sum of the Net Assets Acquired as of May 3, 1997 (except
that Inventory and Receivables are as of June 30, 1997 with respect to
E-C Computer Technical Services, Inc. and RCK Computers, Inc. and as
of July 11, 1997 with respect to the rest of the Business) as set
forth on Exhibit 3.01(a)(1), and $41,500,000.00 (Forty-One Million
Five Hundred Thousand Dollars) (the "Closing Payment"), as adjusted
pursuant to Section 3.01(c) plus, the purchase price of any Fixed
Assets acquired in accordance with Section 8.01(m). All payments in
respect of the Purchase Price shall be allocated in accordance with
the allocation of the Purchase Price as set forth on Exhibit
3.01(a)(2).
(2) Section 3.01, Purchase Price, is further amended by (a)
deleting "$126,116,000 (One Hundred Twenty-Six Million Five Hundred
Thousand Dollars)" in the first and second lines of clause (b)(i) thereof
and inserting in its place the following: "$102,454,000.00 (One Hundred
and Two Million Four Hundred and Fifty-Four Thousand Dollars)" and (b)
changing "$10,000,000" in the first line of clause (b)(ii) thereof to
"$32,813,000.00".
(3) Section 8.03(b), Shareholder's and Sellers' Agreement to
Indemnify, is hereby amended to replace the word "and" immediately
preceding the "(vi)" with a comma and to insert the following at the end of
such section:
"and (vii) any failure by Shareholder or Sellers to obtain the
consent of any third party to the assignment of any Assigned Agreement to
Buyer."
(4) Section 8.03 is hereby amended to add at the end thereof the
following:
(g) Third Party Consents. Each of Buyer, Sellers and
Shareholder shall, and Sellers and Shareholder shall cause XLConnect
to, use its reasonable commercial efforts following the Closing Date
to obtain any consents to the assignment of the Assigned Agreements
which consents have not been obtained at the Closing Date.
(5) Section 8.07, Non-Competition; Non-Solicitation, is hereby
amended as follows:
(i) Section 8.07(a)(i) is hereby amended to change the words "Exhibit
8.07(a)" to the words "Exhibit 8.07(a)(i)";
(ii) Section 8.07(b)(i) is hereby amended to change the words
"Exhibit 8.07(a)" to the words "Exhibit 8.07(a)(ii)"; and
(iii) A new Section 8.07(d) is hereby added at the end thereof, as
follows:
(d) Notwithstanding the provisions of Section 8.07(a)(i) and
Section 8.07(b)(i) hereof, none of the restrictions contained in such
Sections shall apply with respect to any XLS Transferred Customer
historically serviced by XLSource or XLConnect from the Brookfield,
Wisconsin location or any XLS Transferred/XLC Customer historically
serviced by XLSource from the Brookfield, Wisconsin location.
(6) Attachment A, Definitions, is hereby amended as follows:
(i) The definition of "Other Sites" is hereby amended to delete the
reference to the Clayton, Missouri site in (xiii) thereof;
(ii) The definition of "XLS Transferred/XLC Customer" is hereby
amended to read in full as follows:
"XLS Transferred/XLC Customer" shall refer to any XLConnect
customer listed on Exhibit 1 hereto to whom XLConnect provided
Computer Services with revenues in excess of $25,000 and Sellers
received product revenues in excess of $100,000 during the first six
months of 1997 on an annualized basis.
(iii) The definition of "XLC Common Customer" is hereby amended to
read in full as follows:
"XLC Common Customer" shall refer to any customer who is both an
XLS Transferred/XLC Customer and a customer to whom any GECITS
Entities provided Computer Services with revenues in excess of $25,000
or more during the first six months of 1997 on an annualized basis.
(7) Exhibit 5.01(d)(1)(D), Intangibles, is hereby amended (a) to
add the names "E-C Computer Technical Services, Inc." and "RCK Computers,
Inc" and (b) to add the Intellectual Property listed below:
Access to all network information relating to XLS Transferred
Customers and customers party to a Power-by-the-Hour Agreement
regarding special Logins, Login Scripts, Drive Mappings, Boot Disks,
Menuing systems, etc. but not to such tools themselves.
Access to special tagging, stickers, database's, spreadsheet's (asset
& other) used for order for XLS Transferred Customers and customers
party to a Power-by-the Hour Agreement including IP addresses, etc.
but not to such tools themselves.
All customer owned product, including hardware, software, templates,
and instructions.
All CD Master and Duplicate Images, both current and old.
A copy of all CD and other media backup for all Intellectual
Properties acquired by Buyer pursuant to the Agreement.
Access to all custom modified disks pertaining to the integration of
product for the Acquired Sites and the Other Sites but not to such
tools themselves.
Access to complete Promus Hotel integration instructions but not to
such tools themselves.
Access to instructions that include referencing ISO procedures but not
to such tools themselves.
Explanation of standard tools and disks used in the Business.
(8) Exhibit 8.07(a), E-C Computer Technical Services, Inc. and
RCK Computers, Inc. Customers, is hereby amended to change its name to
"Exhibit 8.07(a)(i), E-C Computer Technical Services, Inc. and RCK
Computers, Inc. Customers to whom XLConnect will not Provide Computer
Services".
(9) Exhibit 8.07(a)(ii) is hereby added to the Agreement and
shall read in full as follows:
E-C Computer Technical Services, Inc. and RCK Computers, Inc.
Customers
All customers listed on Exhibit 8.07(a)(i).
Altra Energy IMCON
Amoco Gas Jay Consulting
ANR Pipeline Jimmy
Boerne ISD Kinetic Concepts
Brown & Root, Inc. Life Tabernacle
Charles W. Street Living Centers of America
CHC MW Kellogg
Coastal Corporation NATCO
Continental Airlines PanEnergy
Dennis Fielder Paul Medlock
Elf Atochem Pennzoil
Equitable Resources Robert Thomas
Georgia Gulf SGS
Global Procurement Shell Services
Grinneil Fire Protection St. Frances Cabrini
H&H Dental Texas Commerce Bank
Houston Cellular Van Kampen
Houston Police Dept. Velvet Air
(10) Exhibit 8.07(d), XLS Transferred/XLC Customers and Exhibit
8.07(f), XLC Common Customers, from and after the Closing Date, are deleted
in their entirety from the Agreement.
(11) Each reference to "GE Information Technology Solutions
Acquisition Corp." in the Agreement shall be deemed to be a reference to
the following: "GE Capital Information Technology Solutions Acquisition
Corp."
SECTION 2. Delivery of Lists of XLS Transferred/XLC Customers
and XLC Common Customers. (a) Sellers, Shareholders and XLConnect agree
to deliver to Buyer on or before July 22, 1997 a true and correct list of
the XLS Transferred/XLC Customers.
(b) Buyer agrees to deliver to XLSource on or before the date 20
business days following Buyer's receipt of the list of XLS Transferred/XLC
Customers a true and correct list of the XLC Common Customers.
(c) Each of Sellers, Shareholders, XLConnect and Buyer agree that
until the date Buyer delivers the list of XLC Common Customers to XLSource
it will not expand its provision of Computer Services to the customers
listed on Exhibit 1.
SECTION 3. Certain Severance Payments. Sellers and Shareholders
agree to reimburse Buyer or any GECITS Entity for all severance payments
(but not in excess of the severance payments that such Transferred
Employees would have received if they had been terminated by Sellers,
Shareholder or XLConnect on the Closing Date) made to the first ten
Transferred Employees whose employment is terminated by Buyer or such
GECITS Entity during the 60 days following the Closing Date. Buyer shall
request such reimbursement in writing addressed to XLSource which request
shall provide the names and amounts of the severance payments made for
which reimbursement is requested. Sellers and Shareholders shall make such
reimbursement within 10 days following receipt of any such request.
SECTION 4. Availability of Certain Employees. Each of Buyer,
Sellers and Shareholder acknowledge and agree that Marc Latham, Jill
Mitchell and Mike Dunn presently perform certain management and support
services with respect to the Oracle software being acquired by Buyer. Jill
Mitchell and Mike Dunn are Transferred Employees. Buyer shall use its best
efforts to make available to Sellers and Shareholder at least 10% of Jill
Mitchell's and Mike Dunn's time during regular business hours for the first
150 days following the Closing Date to perform duties presently performed
by such personnel. Sellers and Shareholder shall use their best efforts to
make available to Buyer and the GECITS Entities at least 90% of the Marc
Latham's time during regular business hours for the first 150 days
following the Closing Date to perform duties presently performed by such
personnel in connection with the Business. Following such 150 days, Marc
Latham shall become a Transferred Employee.
SECTION 5. Un-Wind with Respect to Certain Assigned Agreements.
With respect to the Assigned Agreement with each of Computer Services
Corporation ("CSC") and Promus Hotels, Inc. ("Promus"), certain amounts
have been deposited pursuant to the Escrow Agreement pending receipt of all
necessary consents to the assignment thereof to Buyer. Buyer, Sellers and
Shareholder agree that with respect to any such Assigned Agreement, if such
consents to the assignment thereof are not received on or before the date
10 business days following the Closing Date, as promptly as practicable, to
un-wind the purchase of such Assigned Agreements and the related Purchased
Assets, including, without limitation, taking the following actions: (a)
Buyer shall reassign such Assigned Agreement and the Receivables related
thereto to XLSource, (b) Sellers and Shareholders shall purchase any
accounts receivables related to such Assigned Agreement arising after the
Closing Date from Buyer for a purchase price equal to the recorded amount
thereof on Buyer's or any GECITS Entity's books, (c) XLSource shall hire
the Transferred Employees servicing such accounts and (d) Sellers and
Shareholders shall pay to Buyer an amount equal to the difference between
(x) the portion of the Purchase Price allocable to such Assigned Agreements
and the related Purchased Assets, including without limitation, with
respect to CSC, 17.45% of the purchase price premium ($41,500,000) and with
respect to Promus, 2.1% of such premium) less (y) the sum of the amount
distributed to Buyer pursuant to the Escrow Agreement with respect to such
Assigned Agreement and the amount of any Receivables related to such
Assigned Agreement collected by Buyer, if such difference is positive and
Buyer shall pay an amount equal to such difference to XLSource, if such
difference is negative.
SECTION 6. Subsequent Assignment of WCUP. With respect to the
Subcontract Agreement dated January 1, 1995 with Hewlett-Packard Company
("WCUP") Buyer, Sellers and Shareholder agree that if consent to the
assignment thereof is received on or before the date 10 business days
following the Closing Date, as promptly as practicable: (a) Buyer shall
assign such Subcontract Agreement and the Receivables related thereto to
Buyer and from and after such assignment, such Subcontract Agreement shall
constitute an Assigned Agreement, (b) Buyer, Sellers, Shareholders and
XLConnect shall release and deliver the WCUP Services Agreement that has
been executed on the Closing Date, (c) Buyer shall purchase such
Subcontract Agreement and any related Purchased Assets for a purchase price
of $525,000 and (d) Buyer shall provide XLSource with reasonable access to
the server servicing such account for up to 90 days following the date of
such assignment during normal business hours in a manner that is not
disruptive of Buyer's or any other GECITS Entity's business.
SECTION 7. Purchase of Fixed Assets at Other Sites. On or
before the date 20 business days following the Closing Date, Buyer shall
notify XLSource of any Fixed Assets located at the Other Sites which Buyer
desires to purchase. Such Fixed Assets shall be purchased at a purchase
price equal to the net book value thereof on Sellers' or Shareholder's
books. Payment of the purchase price therefor shall be included in the
Post-Closing Adjustment.
SECTION 8. Oracle-Related Assets. Buyer agrees that XLConnect
shall have the right to obtain and use copies of all data in the Oracle
System acquired by Buyer as part of the Business and any proprietary
software developed for use with such Oracle System.
SECTION 9. Time of Closing. Buyer, Sellers and Shareholders
agree that the Closing hereunder shall have occurred at 8:00 A.M. on July
18, 1997.
SECTION 10. Condition of Effectiveness. This First Amendment
shall become effective as of the date on which each of the parties hereto
shall each executed and delivered this First Amendment.
SECTION 11. Reference to and Effect on the Agreement. (a) Upon
the effectiveness of Section 1 hereof, on and after the date hereof each
reference in the Agreement to "this Agreement", "hereunder", "hereof",
"herein" or words of like import, and each reference in the documents
delivered in connection therewith, shall mean and be a reference to the
Agreement as amended hereby.
(b) The execution, delivery and effectiveness of this First
Amendment shall not operate as a waiver of any right, power or remedy of
any party to the Agreement, nor constitute a waiver of any provision of the
Agreement, and, except as specifically provided herein, the Agreement shall
remain in full force and effect and is hereby ratified and confirmed.
SECTION 12. Governing Law. This First Amendment shall be
governed by and construed in accordance with the laws of the Commonwealth
of Pennsylvania.
SECTION 13. Headings. Section headings in this First Amendment
are included herein for convenience of reference only and shall not
constitute a part of this First Amendment for any other purpose.
SECTION 14. Counterparts. This First Amendment may be executed
in any number of counterparts, all of which taken together shall constitute
one and the same instrument, and any party hereto may execute this First
Amendment by signing any such counterpart.
IN WITNESS WHEREOF, the parties hereto have caused this First
Amendment to be duly executed as of the day and year first above written.
GE INFORMATION TECHNOLOGY SOLUTIONS ACQUISITION
CORP., as Buyer
By: /s/ Gerald A. Poch
---------------------------------------------
Name: Gerald A. Poch
Title: Chairman of the Board and President
THE FUTURE NOW, INC.,
as Seller
By: /s/ Alan Resneck
----------------------------------------------
Name: Alan Resneck
Title: Vice President, Secretary and Treasurer
XLSOURCE, INC.,
as Seller
By: /s/ Alan Resneck
----------------------------------------------
Name: Alan Resneck
Title: Vice President, Secretary and Treasurer
E-C COMPUTER TECHNICAL SERVICES, INC.,
as Seller
By: /s/ Alan Resneck
----------------------------------------------
Name: Alan Resneck
Title: Vice President, Secretary and Treasurer
RCK COMPUTERS, INC.,
as Seller
By: /s/ Alan Resneck
----------------------------------------------
Name: Alan Resneck
Title: Vice President
INTELLIGENT ELECTRONICS, INC., as Shareholder
By: /s/ Alan Resneck
----------------------------------------------
Name: Alan Resneck
Title: Secretary
<PAGE>
XLCONNECT SOLUTIONS, INC. XLCONNECT
SERVICES, INC. and XLCONNECT SYSTEMS,
INC., each hereby agrees to and accepts
its obligations under Section 2 hereof.
XLCONNECT SOLUTIONS, INC.
By: /s/ M. Hermina Glaser
------------------------------------------
Name: M. Hermina Glaser
Title: Vice President
XLCONNECT SERVICES, INC.
By: /s/ M. Hermina Glaser
------------------------------------------
Name: M. Hermina Glaser
Title: Vice President
XLCONNECT SYSTEMS, INC.
By: /s/ M. Hermina Glaser
------------------------------------------
Name: M. Hermina Glaser
Title: Vice President
Exhibit 10.2
AMENDED AND RESTATED VOLUME
PURCHASE AGREEMENT
This Amended and Restated Agreement ("Agreement") dated as of April 29,
1997, as amended and restated as of July 18, 1997, is by and between
XLSource, Inc. ("XLS"), with its principal place of business at 411
Eagleview Boulevard, Exton, PA 19341 and Ingram Micro Inc. ("Ingram"),
including its Ingram Alliance division ("Alliance"), with its principal
place of business at 1600 East St. Andrew Place, Santa Ana, California
92705.
RECITALS
A. Ingram is a wholesale distributor of microcomputer and technology
products and services.
B. XLS is a reseller of microcomputer and technology products and is a
wholly owned subsidiary of Intelligent Electronics, Inc. ("IE").
C. Ingram, XLS and IE have entered into a Stock Purchase Agreement (the
"Stock Purchase Agreement") dated as of April 29, 1997 pursuant to
which Ingram will purchase from IE all of the capital stock of
certain subsidiaries of IE.
D. Ingram's willingness to enter into the Stock Purchase Agreement is
conditioned on XLS's agreeing to guarantee the obligations of IE
under the Stock Purchase Agreement on the terms and conditions set
forth therein.
E. XLS is willing to guarantee IE's obligations as described above in
exchange for the ability to purchase substantially all of its
product requirements from Ingram on the terms and conditions set
forth herein.
F. Ingram agrees to sell to XLS all of the product requirements of XLS
on the terms and conditions set forth herein.
Now therefore, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties agree as follows:
1. Definitions.
The following terms used in this Agreement shall be defined as
follows:
1.1. "Alliance Products" shall, initially, be those products offered by
Apple, IBM, Compaq, Hewlett-Packard, Toshiba, NEC, Acer, AST,
Digital, Epson, and Lexmark for distribution through Alliance; the
"Alliance Products" may be updated or modified from time to time by
Ingram on thirty (30) days prior notice to XLS.
1.2. "Non-Alliance Products" shall mean all other products in Ingram's
product inventory and available for distribution on the date an
order is placed for such product.
1.3. "Configured Products" shall mean those products which have been
configured with or installed on other Products by Ingram's
Configuration Services group pursuant to this Agreement.
1.4. "Product" or "Products" shall mean Alliance Products, Non-Alliance
Products, Configured Products and/or Excluded Products, all of which
are subject to product availability from the Product Vendors.
1.5. "Excluded Products" shall mean those Products which Ingram is not
authorized to distribute or those Products for which Ingram has
restrictive distribution rights.
1.6. "Vendors" shall mean the vendors or publishers of the Products
offered by Ingram hereunder.
1.7. "Cost" shall mean the applicable Vendor's invoiced replacement cost
to Ingram.
1.8. "Net Purchases" shall mean total invoice amounts, net of all rebates,
of all Products purchased under this Agreement, net of returns.
1.9. "Combined Purchases" shall mean, for any period, the sum of (A) Net
Purchases for such period and (B) the Purchaser Incremental
Purchases during such period.
1.10. "Purchaser" shall mean GE Capital Information Technology Solutions -
North America, Inc.
1.11. "Base Amount" shall mean, with respect to the Purchaser (excluding
all Acquired Entities) or any Acquired Entity, (i) for the first
year during the term hereof, the Base Percentage of the total
invoice amounts, net of all rebates and returns, of all Products
purchased by the Purchaser (excluding all Acquired Entities) or by
such Acquired Entity, as the case may be, from Ingram in the United
States and Canada during the twelve full consecutive months prior to
(x) the Closing Date (as defined below) in the case of the Purchaser
(excluding all Acquired Entities) or (y) the date of the acquisition
by the Purchaser of the Acquired Entity, in the case of an Acquired
Entity and (ii) for each subsequent year during the term hereof, the
Base Amount for the prior year, multiplied by the Base Percentage.
1.12. "Purchaser Incremental Purchases" shall mean, for any period, the sum
of (A) the excess, if any, of (i) the total invoice amounts, net of
all rebates and returns, of all Products purchased by Purchaser
(excluding all Acquired Entities) from Ingram and its subsidiaries
in the United States and Canada during such period pursuant to that
certain resale agreement (as it may be amended, supplemented or
renewed from time to time) between Ingram and the Purchaser or
similar agreements or any replacement or successor agreement of the
same general business character, over (ii) the Base Amount with
respect to the Purchaser (excluding all Acquired Entities) and (B)
the sum (for each Acquired Entity) of the excess, if any, of (i) the
total invoice amounts, net of all rebates and returns, of all
Products purchased by an Acquired Entity from Ingram and its
subsidiaries in the United States and Canada during such period
pursuant to that certain resale agreement (as it may be amended,
supplemented or renewed from time to time) between Ingram and the
Purchaser and any replacement, successor or similar agreements, over
(ii) the Base Amount with respect such Acquired Entity.
1.13. "Base Percentage" means (i) in the case of the Purchaser (excluding
all Acquired Entities), ** and (ii) in the case of any Acquired
Entity, a percentage to be mutually agreed by the parties hereto
based on such Acquired Entity's historical growth in purchase volume
with Ingram.
** Confidential treatment has been requested for the deleted text, which
has been filed separately with the Securities and Exchange Commission.
1.14. "Acquired Entity" means any business, corporation or other entity
acquired by Purchaser following the date hereof.
2. Term of the Agreement
The term of the Agreement shall commence on the date hereof and
shall continue for a period of three (3) years following the Closing
Date, as defined below, unless terminated sooner pursuant to the
terms hereof, or extended pursuant to Section 4.2 hereof.
3. Products
3.1. Commencing on the Closing Date and thereafter during the term of this
Agreement, XLS shall order 100% of its requirements from time to
time for Products which are listed on Ingram's on-line ordering
system on the date the Products are ordered. In the event Ingram
cannot fulfill the order in the required time frame designated by
XLS, it shall order the product in XLS's behalf from other sources
in order to meet its service level requirements.
3.2. It is acknowledged by Ingram that in the event this Agreement is
assigned with Ingram's consent in accordance with Section 29, the
assignee may have a different ordering process than described herein
and may not order 100% of its requirements from Ingram.
3.3. During the term of this Agreement, Ingram shall use best efforts to
provide and deliver the Products in a timely and efficient manner in
accordance with the performance metrics described in Exhibit A
attached to this Agreement.
3.4. All Products purchased pursuant to this Agreement shall be for resale
only within the United States.
3.5. If authorization for resale is required by the Vendor of a Product,
Ingram shall not be obligated to sell such Product to XLS unless
Ingram has received notice that XLS has been authorized by the
Vendor.
4. Purchase Commitment
4.1. XLS hereby agrees that the Combined Purchases will equal a minimum of
$1.8 billion of Products ("Guaranteed Minimum Revenue") during the
term of this Agreement. The intention of both parties is that the
Combined Purchases will be at a rate of $600 million per year
("Annual Minimum Revenue"). For purposes of this Section 4, a
"year" shall mean a period of 365 or 366 days commencing on the day
following the date that the transactions contemplated by the Stock
Purchase Agreement have been consummated (the "Closing Date") and
the first and second anniversaries of the Closing Date and ending on
the first, second and third anniversaries of the Closing Date,
respectively.
4.2. Promptly following the end of each year under this Agreement, Ingram
will determine whether the Combined Purchases for such year are at
least equal to the Annual Minimum Revenue for such year. In the
event that they are not, Ingram will deliver to XLS a calculation,
certified by an appropriate officer of Ingram, of an amount
established as follows: Annual Minimum Revenue for such year minus
actual Combined Purchases for such year ("Deficiency Amount") **.
In determining Combined Purchases in this calculation, product ordered
by XLS from other sources pursuant to Section 3.1 will be included. XLS
may either pay the invoice within ten days following receipt by XLS or,
at its option, extend the contract beyond the scheduled end of the
term of this Agreement. In the event XLS elects to extend the term
of this Agreement, the Deficiency Amount will be multiplied by **
if the deficiency occurs during the first year of this Agreement,
** if the deficiency occurs during the second year of this
Agreement and ** thereafter and that amount will become the
"Remaining Guaranteed Minimum Revenue" for the period beyond the
term of this Agreement. The amount of time the term is extended
will be calculated by dividing the Remaining Guaranteed Minimum
Revenue by $50 million, rounding up, and adding that number of
months to the term of the Agreement. In no event will XLS have the
option of extending this Agreement more than an additional 24
months.
4.3. In the event that actual Combined Purchases in any year of this
Agreement exceed the Annual Minimum Revenue for such year, then the
Remaining Guaranteed Minimum Revenue, if any, will be reduced by an
amount equal to ** of any excess and, if applicable, the extended
term reduced accordingly or, if there is no Remaining Guaranteed
Minimum Revenue, the Annual Minimum Revenue for the subsequent year
of this Agreement shall be reduced by an amount equal to such
excess.
4.4. This Agreement will terminate when Combined Purchases exceed the sum
of $1.8 billion plus the Remaining Guaranteed Minimum Revenue, if
any, less the aggregate Deficiency Amounts, if any, deferred to the
extended term of this Agreement at XLS's election.
4.5. If in any one year, Combined Purchases are less than ** of
Products (unless this Agreement shall have terminated in said year
pursuant to Section 4.4), then in addition to the remedies under
Section 4.2 above, XLS agrees it will pay an additional amount equal
to ** of the Net Purchases in that
year.
** Confidential treatment has been requested for the deleted text, which
has been filed separately with the Securities and Exchange Commission.
5. Pricing
5.1. All Product prices will be as shown in Ingram's on-line ordering
system as of the date of order, except as otherwise provided below.
5.2. Prices for the following Alliance Products will be calculated at
Ingram's Cost on the date of purchase plus the percentage listed
below:
(a) **
(b) **
5.3. Prices for all Alliance Products other than those described in
Section 5.2 above will be established by Ingram, through the
assignment to Alliance's standard pricing matrix, and will be
substantially consistent with that to other customers with similar
volumes.
5.4. Prices for Non-Alliance Products (except for those Products noted in
Sections 5.5 and 5.6 below) will be calculated at Cost divided by
the factor applicable to the Product type. The Product types and
factors will be as follows:
Product Type Factor
------------ ------
Software **
Hardware **
Accessory Product **
Technical Product **
5.5. Prices for Products from those Vendors and/or product groups listed
on ** shall be calculated at Cost divided by the factor listed beside it
on **. In the event of a conflict between ** and Section 5.4 above, **
will prevail.
** Confidential treatment has been requested for the deleted text, which
has been filed separately with the Securities and Exchange Commission.
5.6. Specialized Products, including memory and licenses, shall be priced
consistent with prices charged to other customers with similar
volumes.
5.7. As Cost changes, Ingram may adjust the pricing shown on its on-line
ordering system to reflect such changes without notice to XLS.
5.8. Ingram agrees that all programmatic promotional pricing programs will
be offered to XLS.
5.9. Ingram and XLS agree that in the event of a substantial change in the
competitive market environment for the products offered by Ingram,
they will make a good faith effort to agree on amended prices for
this Agreement, which will be substantially consistent with prices
for customers with substantially equivalent volumes.
5.10. Ingram will pass through price protection for Products purchased or
in transit to XLS or its customers at the time the Product's Vendor
reduces its price to Ingram. Such price protection shall be in the
form of a credit equal to the amount of the price decrease per unit
of Product multiplied by the number of units in XLS's inventory or
in transit from Ingram to XLS or its customers on the date the price
decrease became effective. In order to obtain such price
protection, XLS must provide Ingram with a completed Ingram Price
Protection form and a computer-generated inventory report listing
the Product qualified for the price protection. Once the price
protection credit has been approved by and received from the Vendor,
a credit memo will be issued and appear on XLS's account within
forty-eight (48) hours. XLS agrees not to deduct any anticipated
price protection credits from amounts owed to Ingram without
Ingram's express prior written consent. Ingram will not be
responsible for passing through price protection relating to any
price protection requests which are rejected by the Product's Vendor
for reasons other than Ingram's performance.
6. Rebates
6.1. XLS shall be entitled to receive a performance-based rebate equal to
the percentage of Net Purchases from Ingram during each fiscal
quarter as determined by the following schedule:
For the period from Each quarter Rebate
May 1 - September 30, 1997 thereafter Percentage
Quarterly Net Purchases ** ** **
Quarterly Net Purchases ** ** **
Quarterly Net Purchases ** ** **
** Confidential treatment has been requested for the deleted text, which
has been filed separately with the Securities and Exchange Commission.
6.2. Products ordered from Ingram that it must buy from other sources in
accordance with Paragraph 3.1 above will count towards rebate goals
but rebates will not be earned on those purchases.
6.3. Within thirty days following the end of any quarter in which XLS
achieves a rebate, Ingram will issue XLS a credit in the amount of
the rebate.
7. Ordering
7.1. There shall be no minimum order size restriction on XLS orders.
7.2. The pricing offered to XLS under this Agreement is contingent upon
XLS placing a majority of its Product orders via electronic ordering
methods offered by Ingram, including its CAPS and EDI services,
beginning after the first six months of the term of this Agreement.
Ingram and XLS will mutually cooperate and commit the necessary
resources to ensure that electronic ordering and order management
systems are put in place within the first six months of the term of
this Agreement in order to permit achievement of the electronic
ordering goal set forth in this Section.
8. Payment Terms
8.1. Ingram will invoice XLS upon Product shipment and/or shipment of the
Configured Products to the location specified on the XLS purchase
order, with all invoices due and payable net thirty (30) days from
date of invoice.
8.2. Alliance Product pricing applies only to those Products purchased on
approved flooring accounts. XLS agrees to utilize Alliance approved
flooring companies as listed in Exhibit C, as it may be modified and
amended from time to time, in order to assure that the associated
flooring fees are subsidized by the Vendor. If XLS uses a flooring
company not listed on Exhibit C, XLS agrees to pay all flooring fees
and related costs charged by such flooring company.
8.3. In the event XLS elects to place an order for Alliance Products on a
net terms account, Ingram will invoice XLS upon Product shipment,
and all such invoices will be due and payable net thirty (30) days
from invoice date. A net terms fee of ** of the total invoice amount
will be added to Alliance Product orders placed on XLS's net terms account.
** Confidential treatment has been requested for the deleted text, which
has been filed separately with the Securities and Exchange Commission.
8.4. If XLS has a reasonable dispute with any invoice received from
Ingram, it agrees that it will pay the undisputed portion of the
invoice and will immediately notify Ingram of the amount remaining
in dispute. The parties will then have thirty (30) days in which to
resolve the dispute before such unpaid amounts will be considered
overdue or delinquent under this Agreement.
8.5. A service charge of the lesser of one and one-half percent (1.5%) per
month or the maximum amount allowed by law may be charged on all
balances past due except disputed amounts ultimately resolved in
XLS's favor.
8.6. XLS shall pay and be responsible for applicable federal, state,
municipal, and other government taxes (such as sales, use, etc.) for
each Product purchased except any applicable income taxes on such
sale. Unless otherwise specified, list prices do not include such
taxes, and they will appear, if applicable, as separate, additional
items on the invoice. Exemption certificates, valid in the place of
delivery, must be presented to Ingram prior to shipment if they are
to be honored.
9. Credit
9.1. XLS shall furnish to Ingram all financial information reasonably
requested by Ingram from time to time for the purpose of
establishing or continuing XLS's credit limit, it being understood
that Ingram shall have the right from time to time, without notice,
to change or revoke XLS's credit limit on the basis of changes in
Ingram's credit policies or XLS's financial conditions and/or
payment record. In such event, the applicable purchase price shall
be paid prior to shipment.
9.2. In the event XLS fails to make timely payment of any undisputed
amount invoiced hereunder, Ingram shall have the right, in addition
to any and all other rights and remedies available to Ingram, at law
or in equity, to immediately revoke any or all credit extended, to
delay or cancel future deliveries and/or to reduce or cancel any or
all quantity discounts extended to XLS. All costs of collection,
including reasonable attorneys' fees, shall be paid by XLS.
9.3. Any obligation of Ingram under this Agreement to deliver Products on
credit terms shall terminate without notice if XLS files a voluntary
petition under a bankruptcy statute, or makes an assignment for the
benefit of creditors, or if an involuntary petition under a
bankruptcy statute is filed against XLS, or if a receiver or trustee
is appointed to take possession of the assets of XLS.
10. Freight, Shipping, Delivery
10.1. Delivery will be made F.O.B origin, ground service, paid by Ingram,
on Ingram's carrier of choice. Ingram will comply with all
reasonable shipping and handling instructions received prior to
shipment. In the event XLS requires shipment on an expedited basis
via XLS's carrier of choice, delivery will be made F.O.B origin at
XLS's expense. When Ingram's "Base Rate" system is operational, XLS
will receive credit on each expedited shipment for the amount of
ground service freight Ingram would have paid on that shipment.
10.2. Ingram will ship Products directly to XLS customers in the United
States at no additional charge.
10.3. XLS shall examine all Products promptly upon receipt thereof. No
later than ten days after delivery, XLS shall notify Ingram of all
claimed shortages or damaged Products, or if rejection is intended,
shall specify all grounds therefor. Failure to give such notice
within ten days after delivery shall be deemed an acceptance of the
Products as of the date of shipment. This Section does not cover
defective returns which are addressed in Section 13.
11. Configuration
11.1. Provided XLS has furnished Ingram properly approved forecasts five
(5) business days in advance of receipt of order from XLS, Ingram
will use all reasonable efforts to ship Configured Products within
two (2) business days. Such shipping will occur only if the orders
do not contain product incompatibility issues. In that event,
Ingram must notify XLS within two (2) hours. In addition, for each
unique configuration, all necessary building instructions and other
pertinent work instructions must be on hand and understood by Ingram
Configuration Services Personnel. Product expedited between Ingram
locations to meet service level requirements will be at Ingram's
expense.
11.2. Orders in excess of 100 units will require review and scheduling
based on Ingram's capacity and the complexity of the Configured
Product.
11.3. Ingram will not be responsible for schedule slippage or related
expenses, including but not limited to overtime labor and freight
associated with expediting the production or delivery of Configured
Product containing product supplied by XLS or supplied by a third
party arranged by XLS, if scheduled delivery of Configured Product
is delayed due to unavailability, late delivery or inoperative
product provided by XLS or a third party arranged by XLS. However,
if the delay is due to Ingram's performance, Ingram will pay
expedited freight.
11.4. All fees for configuration services shall be as set forth in Exhibit
D. During the first six months of the term, Ingram will (a) charge
a flat fee of ** per configured unit and (b) provide XLS with a per
unit rebate amount based on the following schedule:
Number of units
configured during month Rebate per unit
----------------------- --------------
** **
** **
** **
** Confidential treatment has been requested for the deleted text, which
has been filed separately with the Securities and Exchange Commission.
After the end of the first six months, Ingram agrees to provide XLS
with a discount off normal published rates that are substantially
comparable to those given to other customers with substantially
equivalent volume.
12. Stock Balancing
12.1. XLS may return Products which are not defective within one hundred
fifty (150) days after invoice date. All returns will be subject to
the returns fees listed in the table below which is based on the
percentage of returns as compared with the gross sales during the
fiscal quarter in which the return is made, determined by reference
to invoiced prices. Returns will be processed at the lower of
either the invoice unit price paid by XLS or the current price as
shown in Ingram's on-line ordering system as of the date of return
request and will be credited as soon as possible but no later than
the end of the fiscal quarter in which returned. All Products
returned must be undamaged, in the Vendor's original packaging,
unused and in resalable condition.
Fee
Returns Percent (as a % of gross sales)
--------------- -----------------------
** **
** **
** **
** Confidential treatment has been requested for the deleted text, which
has been filed separately with the Securities and Exchange Commission.
12.2. Ingram reserves the right to not accept the return of Products if the
Vendor of such Products has placed restrictions upon the return of
such Products provided Ingram has communicated those restrictions to
XLS prior to shipment. Ingram also reserves the right to not accept
Products which are discontinued or which are being produced or
published by a Vendor which is insolvent or which has declared
bankruptcy. XLS shall pay all costs and bear all risks of loss when
returning Products to Ingram.
12.3. Products purchased under special orders are not eligible to be
returned pursuant to this Section 12 unless Ingram has return rights
with those Vendors. Special orders include Products which the
Vendor has not authorized Ingram to distribute.
12.4. Products purchased as part of Configured Products are not eligible to
be returned unless such returns are due to errors made by Ingram.
The errors will be corrected and the Products reshipped to XLS with
no charge to XLS.
12.5. XLS may return Open Box product without charge in an amount equal to
** of Net Purchases during the fiscal quarter in which the return is made.
Open Box returns exceeding the allowable percentage will be charged a fee
equal to ** of the invoice price, net of rebates.
12.6. A rebox fee of ** per item will be charged on all Products returned
in a damaged box.
13. Defective Returns
Within ninety (90) days after the date of purchase by XLS, XLS may
return to Ingram for replacement or credit any Product found to be
defective; provided that, XLS shall obtain Ingram's approval prior
to returning any such Product. Ingram reserves the right to require
XLS to return defective Products directly to the Products' Vendor
for replacement according to the Vendor's defective Products return
policy. Defective Returns are not included in the Returns
Percentages in Section 12.
14. On Site Personnel
14.1. **
14.2 **
** Confidential treatment has been requested for the deleted text, which
has been filed separately with the Securites and Exchange Commission.
14.3. XLS may, at its option, assign an appropriate number of its full-time
employees to be officed in Ingram's Configuration Center(s). All
such employees will be employees of XLS for all purposes under this
Agreement and will be subject to the workplace rules applicable to
Ingram's own employees while they are employed on Ingram's premises.
Ingram will provide each XLS employee work spaces similar in size to
the work space Ingram provides its employees of similar job grades.
Ingram will provide each XLS employee with a telephone and will
cover the costs of all telephone services used by the XLS employee
in the conduct of business under this Agreement.
15. Large Account Inventory Program
For up to fifteen days, Ingram will hold for XLS's account at **
those Products which have been designated by a Vendor for sale to a
specific customer of XLS ("LAIP Products"). After the fifteenth day,
XLS agrees that it will pay Ingram an amount equal to ** of the LAIP
Product's total invoice value ** that it holds the LAIP Products in its
inventory.
** Confidential treatment has been requested for the deleted text, which
has been filed separately with the Securities and Exchange Commission.
16. Marketing Funds
Ingram will pass through to XLS on a dollar-for-dollar basis any co-
op, rebate or marketing funds which it receives from Vendors which
have been designated for XLS's use.
17. Purchaser Supply Agreement
Ingram acknowledges and agrees on or prior to the date of the
amendment and restatement of this Agreement, XLS has sold to the
Purchaser a portion of XLS's business of reselling micro-computer
and technology products comprising approximately two-thirds (by
dollar volume) of such business. In connection with such
transaction and concurrently with consummation of the transactions
contemplated by the Stock Purchase Agreement, Ingram and Purchaser
are entering into the Resale Agreement referred to in Section 1.12
hereof. Ingram agrees that it will use its commercially reasonable
efforts to provide and deliver all Products ordered by Purchaser
pursuant to such Resale Agreement under the applicable terms of such
Resale Agreement and this Agreement; provided that Purchaser uses
all commercially reasonable efforts to order Products from Ingram
pursuant to such Resale Agreement.
18. Limitation of Warranty
XLS acknowledges and agrees that the Products are provided to XLS
without any warranty other than the warranty which a Vendor may
provide with its Product. INGRAM EXPRESSLY DISCLAIMS ALL EXPRESS
AND/OR IMPLIED WARRANTIES, INCLUDING BUT NOT LIMITED TO IMPLIED
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
19. Patent, Copyright and Trademark Indemnity
Ingram shall have no duty to defend, indemnify, or hold harmless XLS
from and against any damages or costs incurred by XLS arising from
the infringement of patents or trademarks or the violation of
copyrights by Products which were not manufactured by Ingram or were
not manufactured specifically for resale by Ingram alone.
Ingram shall have the option at any time to replace or modify any
Products sold to XLS to avoid patent or trademark infringement or
copyright violations; provided such replacement or modification does
not materially affect performance hereunder.
Notwithstanding any other terms or conditions to the contrary,
Ingram's liability under this Section shall not exceed (i) the
purchase price of the infringing Product, less (ii) reasonable
depreciation computed on a five-year straight line basis.
20. Limitation of Liability
Ingram shall not be liable to XLS, any affiliate of XLS, any
customer of XLS or any other party for any loss, damage, or injury
which results from the use or application by XLS, any affiliate of
XLS, any customer of XLS or any other party of Products and/or
services delivered to XLS or any person or entity designated by XLS,
unless the loss or damage results directly from the intentionally
tortuous or fraudulent acts or omissions of Ingram. In no event
shall Ingram be liable to XLS, any affiliate of XLS, any customer of
XLS or any other party for loss, damage or injury of XLS or any
person or entity designated by XLS, of any kind or nature arising
out of or in connection with this Agreement, or any performance or
non-performance under this Agreement by Ingram, in excess of the net
purchase price of Products and/or services actually delivered to and
paid for by XLS or any other person or entity designated by XLS
hereunder. In no event (including events of loss, damage, or injury
provided for in this Section) shall Ingram be liable to XLS, any
affiliate of XLS, any customer of XLS or any other party for
indirect, special or consequential damages, even if notification has
been given as to the possibility of such damages. XLS hereby
expressly waives any and all claims for such damages.
21. Default
Each of the following events shall be an event of default under this
Agreement:
(a) In the case of either party, if such party has failed to perform
a material obligation under this Agreement and such failure has
continued for a period of thirty days from the date such party
was notified by the other party of such failure.
(b) In the case of either party, if such party (i) makes a general
assignment for the benefit of creditors; (ii) commences any case,
proceeding or other action seeking to have an order for relief
entered on its behalf as a debtor or to adjudicate it a bankrupt
or insolvent, or seeking reorganization, arrangement, adjustment,
liquidation, dissolution or composition of it or its debts or
seeking appointment of a receiver, trustee, custodian or other
similar official for it or for all or of any substantial part of
its property (collectively a "proceeding for relief"); or (iii)
becomes the subject of any proceeding for relief which is not
dismissed within sixty days of its filing or entry.
22. Termination
22.1. Upon the occurrence of an event of default referred to in clauses
(a) or (b) of Section 21 above, the party not in default may
terminate this Agreement upon thirty (30) days' written notice to
the other party.
22.2. This Agreement will terminate automatically concurrently with
termination of the Stock Purchase Agreement.
23. Confidentiality
This Agreement is confidential and contains confidential
information, and as such will not be disclosed to any third party
without the express written consent of both parties. This Section
shall not restrict the rights of either party to disclose
confidential information if required to do so by law or by lawful
order of any governmental entity; provided that in the event any
such disclosure is required, the party making the disclosure shall
advise the other prior to the disclosure and limit the disclosure to
only that confidential information which must be disclosed in order
to comply with the law or order. The parties agree to disclose the
terms and conditions of this Agreement only to their respective
personnel on a need to know basis. The parties agree to develop
jointly a synopsis of this Agreement which will not be subject to
the provisions of this Section.
24. Force Majeure
Neither party shall be liable for delay or failure to perform this
Agreement, in whole or in part, by reason of contingencies beyond
the reasonable control of the party affected, whether herein
specifically enumerated or not, including among others, acts of God,
war, acts of war, revolution, civil commotion, riots, acts of public
enemies, blockage or embargo, delays of carriers, car shortage,
fire, explosion, breakdown of equipment or facilities, strike,
lockout, labor dispute, casualty or accident, earthquake, epidemic,
flood, cyclone, tornado, hurricane or other windstorm, delays of
vendors or other contingencies interfering with production or with
customary or usual means of transportation of products, or by reason
of any law, order, proclamation, regulation, ordinance, demand,
requisition or requirement or any other act of any governmental
authority, local, state or federal, including court orders,
judgments or decrees, or actions of any governmental authority
respecting the registration, re-registration, cancellation,
suspension, labeling and/or ability to transport or sell products,
or any other cause whatsoever, whether similar or dissimilar to
those enumerated above; provided, that the party so affected shall
give prompt written notice to the other party of the event causing
the delay or impediment and shall use all due diligence to overcome
the effects of the event as promptly as possible. Neither party
shall be required to resolve a strike, lockout or other labor
problem in a manner which it alone does not deem proper and
advisable. The party other than the party affected by an event of
the sort enumerated in or contemplated by this Section may, by
written notice to the other party, elect to extend the term of this
Agreement for a period of time equal to the duration of the event
excusing such performance.
25. Notices
All notices and other communications relating to this Agreement or
its terms will be in writing and mailed via first class United
States Postal Service, certified or registered with return receipt
requested or via facsimile. All notices so mailed will he deemed
received four (4) days after postmark date and facsimiles will be
deemed received upon notification of successful transmission.
26. Entire Agreement
This Agreement (including any Exhibits and Addenda) constitutes the
entire Agreement between the parties regarding the purchase and sale
of Products and will cancel, terminate, and supersede any and all
previous agreements, proposals, representations, or statements,
whether oral or written. The terms of this Agreement will supersede
the terms of any invoice or purchase order issued by either party.
Any modifications of this Agreement must be in writing and signed by
an authorized representative of each party.
27. Governing Law
This Agreement will be deemed made in the State of California and
will be governed by and construed in accordance with California
laws, excluding its conflicts or choice of law rule or principles
which might refer to the law of another jurisdiction. The state and
federal courts situated in Orange County, California will have non-
exclusive jurisdiction and venue over any dispute or controversy
which arises out of this Agreement.
28. Counterparts and Headings
This Agreement may be executed in any number of original
counterparts, each of which when executed and delivered will be
deemed to be an original and all of which taken together will
constitute but one and the same instrument. Headings in this
Agreement are included for convenience of reference only and will
not constitute a part of this Agreement for any other purpose.
29. Assignment
29.1. XLS shall not assign any Product order or any interest therein
without the written consent of Ingram. Any such actual or attempted
assignment without Ingram's prior written consent shall entitle
Ingram to cancel such order upon written notice to XLS.
29.2. Neither party shall assign its rights and interests under this
Agreement, either wholly or partially, to any other party without
the express written consent of the other party hereto.
29.3. In the event Ingram agrees to a partial assignment of this Agreement,
due to the sale of branches representing a portion of the assets of
XLS, all revenue requirements, rebate provisions and other economic
provisions specified herein will be prorated based upon the end-user
revenue for the last four (4) fiscal quarters of all of the XLS
branches.
30. Severability
A judicial determination that any provision hereunder is invalid in
whole or in part shall not affect the enforceability of those
provisions found not to be invalid.
31. Independent Parties
The parties agree that each operates as a business independent of
the other. Both parties agree that neither of them will hold itself
out to be the agent, partner or related party of the other.
IN WITNESS WHEREOF, each party hereto has caused this Agreement to
be duly executed and delivered on its behalf as of the day and year first
above written.
"XLS" "Ingram"
XLSource, Inc. Ingram Micro Inc.
By: /s/ Alan Resneck By: Michael Grainger
------------------------------ -------------------------------
(Officer of the Company) (Officer of the Company)
Its: Vice President Its: Executive Vice President
Worldwide Chief Financial Officer
<PAGE>
<PAGE>
EXHIBIT A
-----------
Page 1 of 3
DISTRIBUTION/CONFIGURATION SERVICE LEVELS
(except as stated)
** ** **
_______________________________________________________________________
Shipping Accuracy ** ** **
Configuration Accuracy
product DOA/defective ** ** **
configured properly ** ** **
Fill Rate ** ** **
_________________________________________________________________________
Service Level - Configuration (not subject to technical hold/review)
within 2 days* ** ** **
within 3 days ** ** **
within 4 days ** ** **
_________________________________________________________________________
*These numbers are based on receipt of 5 day forecast.
Service Level - Distribution ** ** **
Price Book Accuracy
updated within 24 hours ** ** **
Hot Orders ** ** **
_________________________________________________________________________
(same day shipment as configuration unless stipulated at time of order
receipt)
Customer Satisfaction:
Ingram agrees to monitor customer satisfaction by utilizing mutually
agreeable surveys to XLSource branches and formulating action plans to
address differences.
** Confidential treatment has been requested for the deleted text, which
has been filed separately with the Securities and Exchange Commission.
<PAGE>
<PAGE>
EXHIBIT A
-----------
Page 2 of 3
XLS DISTRIBUTOR/CONFIGURATION MEASUREMENT PROGRAM
KEY METRIC DEFINITIONS:
- ----------------------
SHIPPING ACCURACY:
% of orders which have zero defects (as measured by all of the following
criteria) versus total orders:
- - Order without warehouse picking/shipping errors (wrong SKU, wrong count,
inventory accuracy, used product shipped in error, etc...)
- - Order shipped same day as order entry
- - Order shipped to correct place with proper documentation (serial
numbers, tracking numbers, packing slips, proper labels, etc...)
CONFIGURATION ACCURACY (numbers based on getting proper instructions from
customer)
- - Order configured correctly
- - Configured product operates (i.e...no DOA's)
FILL RATE (without constrained product):
- - % of orders that are filled at time of order versus total orders, plus
total legitimate back orders, less constrained, new and/or discontinued
Product.
SERVICE LEVEL - CONFIGURATION:
- - % of all orders without back orders (reported by XLS account) that meet
or beat the contracted SLA for that account versus total orders for the
account.
SLA measure will begin at time of order entry to the date the complete
order ships to the customer.
SERVICE LEVEL - DISTRIBUTION:
- - % of orders which from time of shipment to time of arrival at the
customer does not exceed 2 days
PRICE BOOK ACCURACY:
- - % of days that the price book is not updated to current prices versus
total business days.
HOT ORDERS
- - % of configuration orders shipped same day or within one day versus
total configuration orders.
<PAGE>
<PAGE>
EXHIBIT A
-----------
Page 3 of 3
**
(a) **
(b) **
**
** Confidential treatment has been requested for the deleted text, which
has been filed separately with the Securities and Exchange Commission.
<PAGE>
<PAGE>
EXHIBIT B
---------
Vendor # Vendor Name ** ** **
- ----------------------------------------------------------------------------
1153 3COM ** ** **
2794 3COM AUTHORIZED PRODUCTS ** ** **
3703 3M DATA STORAGE ** ** **
1047 ADOBE COMMERCIAL ** ** **
7520 ADOBE UNIX ** ** **
4044 AMERICAN POWER CONVERSION ** ** **
2722 ATTACHMATE CORPORATION ** ** **
4815 ATTACHMATE CORPORATION ** ** **
1567 ATTACHMATE DCA ** ** **
7980 BANYAN SYSTEMS ** ** **
2936 BAY NETWORKS ** ** **
8090 BAY NETWORKS WELLFLEET DIVISION ** ** **
1280 BORLAND INTERNATIONAL ** ** **
1357 BORLAND INTERNATIONAL ACADEMIC ** ** **
1335 CAERE CORPORATION ** ** **
1363 CANON COMPUTER SYSTEMS ** ** **
1655 CHEYENNE SOFTWARE ** ** **
3122 CISCO SYSTEMS ** ** **
2622 CISCO SYSTEMS ** ** **
1397 COREL CORPORATION ** ** **
7474 COREL CORPORATION ** ** **
7497 COREL CORPORATION ** ** **
7498 COREL CORPORATION ** ** **
7499 COREL CORPORATION ** ** **
7951 COREL WORDPERFECT ** ** **
1305 CORNERSTONE ** ** **
1708 CREATIVE LABS ** ** **
2063 CTX ** ** **
1460 CURTIS MANUFACTURING ** ** **
3794 EXTENDED SYSTEMS ** ** **
1373 GLOBAL VILLAGE CORPORATION ** ** **
2000 HAYES ** ** **
2125 INTEL ** ** **
3714 INTEL NETWORKING ** ** **
7372 IOMEGA DITTO ** ** **
7297 IOMEGA JAZZ ** ** **
7296 IOMEGA ZIP ** ** **
1138 KINGSTON TECHNOLOGY ** ** **
2439 LOTUS (NOTES) ** ** **
1409 LOTUS DEVELOPMENT ** ** **
2400 LOTUS DEVELOPMENT ** ** **
3249 LOTUS PASSPORT ** ** **
4872 LOTUS PASSPORT ACADEMICS ** ** **
1252 MADGE ADAPTERS ** ** **
2502 MICROSOFT ACADEMIC ** ** **
3124 MICROSOFT ACADEMIC ** ** **
2786 MICROSOFT CONSUMER PRODUCTS ** ** **
2500 MICROSOFT CORPORATION ** ** **
5118 MICROSOFT INPUT ** ** **
3018 MICROSOFT MOLP ** ** **
2495 MS BACKOFFICE ** ** **
3404 NOKIA ** ** **
2733 NOVELL ** ** **
3783 NOVELL GROUPWARE ** ** **
4786 NOVELL GROUPWARE ** ** **
1632 NOVELL UPGRADES ** ** **
9716 NOVELL UPGRADES ** ** **
3717 PORT INCORPORATE ** ** **
3335 SEAGATE SOFTWARE NSMG ** ** **
3157 SMART MODULAR ** ** **
3200 SOFTWARE PUBLISH ** ** **
3521 SYMANTEC ** ** **
1639 SYMANTEC ACADEMIC ** ** **
2176 US ROBOTICS NETWORKING ** ** **
3882 US ROBOTICS ** ** **
2609 US ROBOTICS/MOBIL ** ** **
3923 XIRCOM, INC. ** ** **
Note: As Manufacturer costs change, Ingram pricing may be adjusted to
reflect such changes.
* Vendor with Revised Pricing
** Confidential treatment has been requested for the deleted text, which
has been filed separately with the Securities and Exchange Commission.
<PAGE>
<PAGE>
EXHIBIT C
---------
<TABLE>
<CAPTION>
INGRAM ALLIANCE
VENDOR SUBSIDIZED FLOORING CHART
VENDOR IM and IA OPEN SOURCING VENDOR #s IBM CO DEUTSCHE AT&T NATIONS T.AMERICA FINOVA
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <S> <C> <S> <C> <S> <C> <S>
ACER IA only N/A All but Monitors Yes Yes Yes Yes Yes Yes
APPLE IA only N/A All but S/W No Yes No Yes Yes Yes
AST IM & IA N/A All Yes Yes Yes Yes Yes No
COMPAQ IM & IA Primary & Secondary All No(pilots only) Yes Yes Yes Yes Yes
DIGITAL IA only N/A 4344 only Yes Yes Yes Yes Yes Yes
EPSON IM & IA N/A All Yes Yes Yes Yes Yes Yes
HEWLETT IA only Primary and Dual Source All No Yes Yes Yes Yes Yes
PACKARD
IBM IM & IA Primary & Secondary All but S/W Yes No No No No No
LEXMARK IM & IA N/A All Yes Yes No Yes No No
NEC IM & IA N/A All Yes Yes Yes Yes Yes Yes
TOSHIBA IM & IA N/A All but disk Yes Yes Yes Yes Yes Yes
Notes: Toshiba, Epson, and DEC flooring billed directly to Ingram (we bill
vendor); flooring companies bill all other vendors directly. If the wrong
flooring company is used, then the flooring company will bill the customer
the 1.35% fees directly.
Special HP Note: Subsidized flooring only relates to HP dealers, not HP
VAR's or direct accounts. If a VAR places an order on his Ingram Alliance
account on flooring, he will be billed the flooring fees from the flooring
company.
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT D
---------
CONFIGURATION SERVICES PRICING
HARDWARE INSTALLATION PRICE SOFTWARE INSTALLATION PRICE
- ------------------------------------------------------------------------------------------------------
<S> <C> <S> <C> <C> <S> <C> <S> <C>
Base System Charge (charged to every unit; ** DOS Windows 3.1 Single Software **
covers handling through configuration process.) Applications
H/W ** Software suits (MS Office) **
Memory, NIC, I/O board, Modems, Windows 95, OS/2 **
Sound Blaster Cards, Video Cards, Windows NT (wkst) **
Floppy Drive, CD-ROM, Hand Drive Windows NT (server) **
Rack Mount ** Network OS (Novell, Microsoft, LAN) **
Attached Devices (Primers, Monitors, etc.) ** Network Applications (ArcServer, etc.) **
Burn-In 2 Hours ** UNIX, SCO **
Burn-In: 24 Hours ** Decompress - Win 3.X. Win95, **
WinNT (Dual Bootable O/S)
Burn-In: 48 Hours ** "Special" burn in, testing **
- ------------------------------------------------------------------------------------------------------
*Single SKU order quantities in excess of 25 units quoted on request.
SPECIAL SERVICES **
- ------------------------------------------------------------------------------------------------------
<S> <C>
Image Download (Proprietary Software) **
Asset Tags **
Special Engineering Services* **
(Image Development, Prototyping, Compatibility
Testing, Future Development)
Depopulation **
- ------------------------------------------------------------------------------------------------------
* Special Engineering Services required for Image Development (** fee per Image)
DESKTOP (QTY. 1) CHARGE EXTENDED NOTEBOOK (QTY. 5) CHARGE EXTENDED
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <S> <C> <C>
Base System Charge ** ** Base System Charge ** **
4Mb Memory ** ** 2Mb Memory ** **
NIC ** ** PCMCIA - Fax/Modem ** **
Sound Blaster Board ** ** PCMCIA - Flash Mem ** **
Modem/Fax Board ** ** Install Microsoft Office ** **
Total: ** ** Total: ** **
- ------------------------------------------------------------------------------------------------------
LAN SERVER (QTY. 2) CHARGE EXTENDED LAN CLIENT (QTY. 40) CHARGE EXTENDED
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <S> <C> <C>
Base System Charge ** ** Base System Charge ** **
Novell ** ** 8Mb Memory ** **
32 Mb Memory ** ** NIC ** **
CD-ROM Drive ** ** Install Microsoft Office ** **
NIC ** ** Windows NT (wkst ) ** **
Rack Mount ** ** 100 Mb Image download * ** **
Total: ** ** Total: ** **
- ------------------------------------------------------------------------------------------------------
PRICES ARE SUBJECT TO CHANGE WITHOUT NOTICE
CONTACT YOUR SALES REPRESENTATIVE FOR CURRENT PRICING FEBRUARY 1997
</TABLE>
** Confidential treatment has been requested for the deleted text, which
has been filed separately with the Securities and Exchange Commission.
